Property Tax

Property tax is a local tax assessed on real estate by a city, county, or municipality. It is based on the assessed value of the property, including land and buildings, and is used to fund public services such as schools, roads, police, and fire departments.

✅ Key Points

🏠 Who Pays Property Tax?

• Property owners, including:
  • Homeowners
  • Landlords
  • Businesses that own real estate

🧮 How Is Property Tax Calculated?

• Local governments determine an assessed value for the property
• A tax rate (often called a mill rate) is applied to that value

Example:
If a home is valued at $200,000 and the local tax rate is 1.2%, the annual property tax is $2,400.

📅 When Is It Paid?

• Usually annually or semi‑annually
• Payment schedules vary by local jurisdiction
• Taxes may be paid:
  • Directly by the owner, or
  • Through an escrow account with a mortgage lender

🧾 Where Is Property Tax Deducted on a Tax Return?

• Property taxes may be deductible on Schedule A (Form 1040) if the taxpayer itemizes
• Property tax is included in the State and Local Tax (SALT) deduction

💰 SALT Deduction Rules (Updated)

✅ Federal Deduction Limits (OBBBA)

• 2025–2029 SALT cap:
  • $40,000 (Single / MFJ)
  • $20,000 (Married Filing Separately)
• Income‑based phaseout:
  • Begins at $500,000 MAGI ($250,000 MFS)
  • Deduction reduced by 30% of excess MAGI
  • Cannot be reduced below $10,000
• Cap reverts to $10,000 in 2030, unless changed by Congress

⚠️ Property tax is not deductible for federal purposes if:

• The taxpayer takes the standard deduction, or
• SALT payments exceed the applicable cap

📌 Example

A homeowner in Georgia owns a house valued at $250,000.

• Local property tax rate: 1.5%
• Annual property tax:
  $250,000 × 1.5% = $3,750

✅ If the homeowner itemizes and their total SALT payments are below the cap, the $3,750 may be deductible on their federal return.

🧠 Tips

• Property tax deductions apply only to real estate, not personal property (unless specifically assessed as part of real property)
• Mortgage statements may include property tax paid through escrow—verify the actual amount paid
• Property taxes on rental or business property are generally deductible as a business expense, not on Schedule A