Under current tax laws, most property taxes paid for residential real estate is deductible. Choosing to clump two payments into the same year may help offset Uncle Sam’s reach in some cases.
According to the IRS in Publication 17:
“Deductible real estate taxes are any state, local, or foreign taxes on real property levied for the general public welfare. You can deduct these taxes only if they are based on the assessed value of the real property and charged uniformly against all property under the jurisdiction of the taxing authority.”
Here are a couple of items to think of concerning the payment of your deductible Real Estate Taxes:
- If you’re not getting a deduction for your real estate taxes each year because your standard deduction(s) are a higher amount, consider “Clumping” two years taxes into the same year in order to get your total itemized deductions over your standard deduction.
- If you had an unusual year of operating losses from a business entity or other similar pass through entity, consider holding off on your property taxes until next year in order to maximize the clump in a possible higher/more needed deduction year.
- Every year may not be a clumping year. Do not feel bad if these examples do not apply to you, just remember, this is one of the few deductible timing options left to us from Uncle Sam, so we do not want to waste them.
In closing, never let the Tax Tail, Wag the Dog, as it is possible to out think a tax situation and end up with paralysis through analysis. Every situation is different, and we are not suggesting tax advice or making recommendations, only pointing out a few neat tips that might help save a few taxes.
Have a Great Day!
P.S. – Feel free to forward to a friend in need!