Are real estate taxes the same as property taxes?

The term “property taxes” usually refers to real estate taxes paid on your home or property. Yet, there are many different types of property an individual can own—and each type of property is taxed differently.

Real estate taxes at-a-glance

• Real estate taxes are typically based on your property’s value and help fund local services like schools and roads
• Not all property taxes are deductible on your income tax. Typically, only value-based taxes that meet IRS criteria may qualify.
• You may be able to deduct property taxes on a personal residence if you itemize, but limits apply to total state and local tax (SALT) deductions.
• Rental property taxes are deducted differently than real estate taxes on real estate used for personal use. Rental property taxes are generally deductible as a business expense rather than an itemized deduction.
• The type of property you own and how you use it (personal vs. rental) can significantly affect your tax liability

What are real estate taxes?

Real estate taxes are the same as real property taxes. They are levied on most properties in America and paid to state and local governments. The funds generated from real estate taxes (or real property taxes) are typically used to help pay for local and state services.

What types of real estate taxes exist?

Real estate taxes generally include recurring property taxes, transaction-based taxes, and one-time assessments, depending on how and when the property is taxed.

While most homeowners think of property taxes as a single bill, there are several types of real estate-related taxes and charges that may apply over time.

Common types of property taxes include:

• Property taxes (real estate taxes): Recurring taxes based on the assessed value of your home that fund public services like schools, roads, and emergency services
• Transfer taxes: Taxes imposed when ownership of a property changes hands, typically paid at closing
• Special assessments: Charges for specific improvements that benefit your property, such as new sidewalks or sewer upgrades (often not deductible)

Note: Personal property is any property that is not real estate property, and personal property tax is separate from real estate taxes. Taxes on movable assets like vehicles can be deductible, but are treated differently.

Keep in mind: Based on Internal Revenue Service guidelines, only certain types (typically those based on the assessed value of your property and used for general public purposes) may be deductible.

Personal property tax

There is a tax on personal property called “personal property tax,” which isn’t the same. Personal property refers to items that are mobile, rather than real property that’s fixed.

Personal property tax vs. real estate tax

While real estate taxes cover only taxes on real property like a condo, home or rental property, personal property taxes include tangible and movable personal property including, transportation vehicles (like cars, planes, boats, trailers, or mobile homes). Types of personal property subject to personal property tax vary by jurisdiction. in some cases, there may be cases where a mobile home is considered real property and not personal property.

Items not subject to personal property tax include intangible personal property; some jurisdictions may tax certain business personal property items but not the equivalent personal use items.

How do real estate taxes differ for rental vs. real estate property for personal use?

Real estate taxes are generally deducted as itemized deductions for personal use real property but treated as business expenses for rental property.

The tax treatment depends on how you use the property. Based on IRS guidance, rental income and expenses, including real estate taxes, are typically reported on Schedule E, while personal use real property taxes may be deducted on Schedule A if you itemize.

Take note: how often you rent out your property and how much you use it personally can affect how your property is classified and how deductions are applied.

How do real estate taxes affect overall tax liability?

Real estate taxes can reduce your taxable income if it makes sense for you to itemize deductions and you qualify to claim a deduction.

However, the total amount you can deduct for state and local taxes, including property taxes, is subject to a SALT deduction cap ($40,400 for single and joint filers, $20,200 for MFS). This limit applies to the combined total of real property taxes, personal property taxes, and either state income or sales taxes.

It’s also important to note:

• Some charges, like fees for specific services or improvements, may not qualify as deductible taxes
• Real property taxes for rental property are typically deducted separately and can reduce taxable rental income, rather than being subject to the same limits

More help navigating real estate taxes and property taxes

Real estate taxes can get complicated fast.  Whether you choose to file with a tax pro or file with H&R Block Online, you can rest assured that we’ll help you get your maximum refund.*

*All tax situations are different. Not everyone gets a refund. See hrblock.com/guarantees for complete details.