Are real estate taxes deductible?

What counts as a deductible real estate tax

Publication 530 describes the deductible tax as an annual tax most state and local governments charge on the value of real property. Two conditions decide whether a charge on your bill qualifies. The tax has to be assessed uniformly at a like rate on all real property throughout the community, and the proceeds have to be used for general community or governmental purposes rather than as payment for a special privilege or a special service rendered to you. A flat charge you pay for something you receive, even if the county collects it on the same bill, fails the second test.

The publication also fixes who may deduct it and when. You can deduct real estate taxes imposed on you, and only in the year you paid them, either at settlement or closing or to a taxing authority during the year. Paying through an escrow account counts, but with a limit that is explained below. To deduct anything at all you must file Form 1040 or 1040-SR and itemize on Schedule A, which means giving up the standard deduction for that year.

How the deduction splits in the year you buy or sell

For federal income tax purposes the seller is treated as paying the property taxes up to but not including the date of sale, and the buyer is treated as paying them beginning with the date of sale. That applies regardless of the lien dates under local law, and the settlement statement usually shows the division. Each of you can deduct your own share, if you itemize, for the year the property is sold, even if one of you actually paid the whole bill.

Publication 530 works an example. You bought the home on September 1, the property tax year is the calendar year, and the $730 tax was paid by the seller on August 15. You owned the home for 122 days in the tax year (September 1 to December 31, counting the date of purchase). Divide 122 by 365 to get 0.3342, and multiply by $730. Your deduction is $244, and you are treated as having paid that amount even if the contract did not require you to reimburse the seller. The calculator above runs the same arithmetic: $730 and 122 days returns $244.

The flip side matters for basis. If you pay any part of the seller's share and the seller does not reimburse you, that part is not deductible: you add it to your basis in the home. If the seller paid part of your share, you can still deduct it, but you must reduce your basis by that amount unless you reimbursed the seller. Taxes that were imposed on the seller for an earlier year and that you agree to pay when you buy (delinquent taxes) are also not deductible; they become part of the cost of the home.

Escrow payments: deduct what the lender actually remitted

Many monthly house payments include an amount placed in escrow for real estate taxes. The publication warns that you may not be able to deduct the total you pay into the account. You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority, and the tax bill shows that amount. In practice, that means the number to use is the tax paid out in the year, not twelve times the escrow portion of your payment. A year with an escrow shortage or a mid-year change in the monthly amount can make the two figures differ by hundreds of dollars.

Charges on the bill that are not real estate taxes

Publication 530 lists several items you cannot deduct as real estate taxes even though they may appear on or beside the bill. An itemized charge for services to specific property or people is not a tax, even if paid to the taxing authority: a unit fee for the delivery of a service (the publication's example is $5 per 1,000 gallons of water), a periodic charge for a residential service (a $20 per month or $240 annual trash collection fee), or a flat fee for a single service such as a $30 charge for mowing an overgrown lawn. The publication advises you to look at the bill itself to find any such charge and to ask the taxing authority or lender for a copy if you were not sent one.

Assessments for local benefits that tend to increase the value of your property, such as new streets, sidewalks, or water and sewer systems, are added to basis rather than deducted. Only the part for maintenance, repair, or interest charges on those benefits can be deducted, and you must be able to show how much of the assessment that is; otherwise none of it is deductible. Transfer or stamp taxes on a home purchase go into the cost basis (for a seller they reduce the amount realized). Homeowners' association assessments are not deductible because an association, not a government, imposes them, and foreign taxes on real estate are not deductible.

The state and local tax limit

Real estate taxes share one overall cap with state and local income or sales taxes. Publication 530 reports that for 2025 the overall limit increased to $40,000 ($20,000 if married filing separately). The limit is reduced if your modified adjusted gross income is more than $500,000 ($250,000 if married filing separately), but it will not be reduced below $10,000 ($5,000 if married filing separately). The Schedule A instructions explain the computation. A household with a $12,000 property tax bill and $9,000 of state income tax would have $21,000 of capped taxes, comfortably under $40,000, while a high-tax household can reach the cap. The publication also notes that if you elect to deduct sales taxes on the home or on building materials, you cannot count those sales taxes in your basis.

Worked illustration

This illustration uses invented numbers and the publication's method. You close on a home on July 1. The calendar-year tax is $4,380, and the seller already paid the full bill in March. You owned the home for 184 days (July 1 to December 31, counting the date of sale). Your share is $4,380 x 184 / 365 = $2,208.00. You may deduct $2,208 for the year of purchase if you itemize, and because the seller paid your share you reduce your basis by $2,208 unless you reimbursed the seller at closing. If you also pay $4,380 next year in your own name, the full amount is deductible next year, subject to the overall limit.

Records worth keeping

Keep the settlement statement, the tax bill, and the lender's year-end statement showing what was paid out of escrow. Together they show your share at purchase, the amount actually remitted, and any refund that arrives later. A refund of real estate tax you paid this year reduces the deduction for this year; a refund for an earlier year may be taxable under the rules in Publication 525, which is explained on our real estate tax refund page.

Related homeowner topics

See also which closing costs are deductible, how co-op owners deduct their share of taxes, and why homeowners insurance is not deductible. To run the numbers, use the property tax proration calculator, the SALT deduction cap calculator, and the standard vs itemized deduction calculator.

Sources

• IRS Publication 530, Tax Information for Homeowners (2025): the “State and Local Real Estate Taxes”, “Deductible Real Estate Taxes”, “Items You Can’t Deduct as Real Estate Taxes” and “What’s New” sections. Read November 2, 2026.

Edition read: Publication 530 (2025), for use in preparing 2025 returns. Dollar limits, credits and rates in the publication are for 2025 and can change; check the current publication and the Schedule A instructions for your tax year. This page summarizes the publications and does not replace them. Marked for human review.