The SALT Deduction Cap
Property tax is categorized under the State and Local Tax (SALT) deduction, which includes state and local income taxes as well as sales taxes. The IRS also has a limit on the total amount you can claim as a deduction.
- $10,000 per year for individual and married joint filers
- $5,000 per year for married filers filing separately
This means that even if you pay $15,000 or more in property taxes alone, the most you can deduct is $10,000. The cap applies to the combined total of your property taxes and either state income or sales taxes.
Example: Take the example of a taxpayer who pays $8,000 in state income tax and $6,000 in property tax during the year. The total amount becomes $14,000. In this case, they are only entitled to claim $10,000, even though the amount exceeds the limit.
What Property Taxes Are Eligible?
You may claim deductions for property taxes on your primary residence, a secondary residence, or parcels of land owned, provided that the taxes are:
- Based on the assessed value of the property.
- Levying for the general public benefit.
Fees for garbage collection or special assessments for property improvements do not qualify as deductible taxes.
How To Apply For The Deduction
Property taxes are only deductible upon itemizing deductions under Schedule A of the federal return. Standard deduction claimants are ineligible for property tax deduction.
Bottom Line
The deductible property tax limit is capped under SALT. For most taxpayers, this is capped to $10,000 per year irrespective of the actual payment. If you reside in a high tax state or have multiple properties, reach out to us today. Dimov NYC CPA is ready to present the most optimal tax deduction strategy.
