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Real Estate and Personal Property Taxes

Real estate taxes

You can deduct the real estate taxes you pay on property in the year you pay them. Ex: You received a bill in January 2016, but you prepaid it in December 2015. This means you‘ll deduct the amount on your 2015 return.

Your mortgage lender might pay your real estate taxes from an escrow account. If so, they'll send you Form 1098. This form will report any real estate taxes you paid. You should receive your 1098 by Jan. 31, 2016. If you don’t, contact your mortgage lender.

Statements from the Department of Housing and Urban Development (HUD) also report real estate and property taxes. You’ll receive a HUD statement when you buy or sell property. The statement lists the taxes paid by both the buyer and seller.

If your condo association charges you a special fee, you can’t deduct it as real estate tax. These fees are considered condo fees. However, you can deduct any amount of your fee that covers property taxes. If the condo association sends you a statement, it should tell you the amount of property tax the fees covered.

Personal property taxes

You can deduct the tax you pay on personal property -- like cars and boats. Personal property tax -- also called an excise tax -- is based on the value of the item.

To deduct property taxes, all of these must apply:

  • The tax is imposed on personal property.
  • The tax must be ad valorem. This means it's mostly in proportion to the value of the personal property.
  • The tax is imposed on an annual basis, even if collected more or less than once per year.

Claim these as itemized deductions on Schedule A:

  • Real estate taxes (Line 6)
  • Personal property taxes (Line 7)

Taxes you deduct elsewhere on your return -- like for a home office or rental -- don't qualify for this deduction.

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