Real Estate and Personal Property Tax: What’s the Difference?
Whether you will pay real estate tax, personal property tax, or both is a matter of your property’s mobility:
Real estate tax (also called “real property tax”) applies to property that is immovable, such as your house, a building, or land. If you own a home, you pay this tax through your monthly mortgage payment or through direct payment to your tax assessor.
Personal property tax applies to movable property – an RV, mobile home, boat, vehicle, or plane, among other assets.
Real estate and personal property taxes are based on the type of property you own and its assessed value.
Deducting Real Estate Taxes: Quick Facts
Real estate taxes are based on the assessed value of the real estate, and are deductible only by the taxpayers who own it.
To get a tax benefit for those real estate taxes, you must itemize instead of using the standard deduction.
You can deduct the real estate taxes you pay on your property in the year you pay them if they have accrued. For example, you may receive a bill due in January 2017 for an amount that accrued and you decide to prepay in December 2016. This means you’ll deduct the prepaid amount on your 2016 return.
If you own a home, your mortgage lender may pay your real estate taxes from an escrow account. If so, they’ll send you a Form 1098. This form will report any real estate taxes you paid. You should receive your 1098 by Jan. 31, 2017. If you don’t, contact your mortgage lender.
Statements required by the Consumer Financial Protection Bureau (CFPB) also report real estate taxes. When you buy or sell property, you’ll receive a Closing Disclosure statement. 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 real property taxes. If the condo association sends you a statement, it should tell you the amount of real property tax the fees covered.
Deducting Personal Property Taxes: Quick Facts
To deduct personal property taxes, all of these must apply:
- The tax is imposed on personal property.
- The tax must be ad valorem, meaning it’s mostly in proportion to the value of the personal property.
- The tax is imposed on an annual basis, even if it’s collected more or less than once a year.
- You must claim these as itemized deductions on Schedule A:
- Real estate taxes (Line 6)
- Personal property taxes (Line 7)
If you have a home office or a rental, these taxes are deducted elsewhere on your return.
Which Taxes Can I Deduct?
The experts at H&R Block can look at your personal situation and help you decide if you’re eligible to deduct real estate taxes, personal property taxes or both. And if you’d rather file your taxes yourself, know you are still backed by our 100% accuracy and maximum refund guarantees. In an office or online, don’t just get your taxes done. Get your taxes won with H&R Block.
Looking to find tax deductions? Review uncommon tax deductions to find out how a Tax Pro at H&R Block can help you identify ones that apply to you.
Accounting and substantiating large deductible gifts, gift donations, and philanthropic giving. Claiming contributions of property over $500 require a Form 8283 and acknowledgement from the accepting.
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