April 13th, 2011
Last Minute Tax Tip – Real Estate Taxes
Taxes paid on property assessed by a local government or other taxing authority are deductible when paid.
Common fees include taxes paid to your city, county, or school district.
If you have a mortgage, usually the total amount is reported on your mortgage interest statement (IRS Form 1098). In addition to real estate taxes, the interest recipient may use box 5 to give you other information, like the address of the property that secures the debt, and insurance paid from escrow.
Real estate taxes get reported on Schedule E if it’s an investment property. Generally, the amount will not include taxes charged for local benefits and improvements that increase the value of your property. For example, real estate taxes connected with assessments for improvements are not deductible when paid. Instead, they are added to the cost of the land.
Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation.
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