There are three types of deductible non-business taxes:
1.state, local and foreign income tax,
2.real estate tax, and
3.personal property tax.
To be deductible the tax must be charged to you and must have been paid during your tax
year. Taxes may be claimed only as an itemized deduction on Form 1040, Schedule A.
State and local income taxes withheld from your wages during the year appear on your
Form W-2. Add to this any estimated taxes paid to state or local governments during the
year and any additional payments you made with last year's state or local return. Also, if
you paid any prior year's state or local income tax during the year, this amount is
deductible. Generally, you can take either a deduction or a tax credit for foreign income
taxes. For information regarding the foreign tax credit, select Topic 856.
Deductible real estate taxes are generally any state, local, or foreign taxes on real
property. They must be charged uniformly against all property and must be based on
property value. Many states and counties also impose local benefit taxes for improvements
to property, such as assessments for streets, sidewalks, and sewer lines. These taxes
cannot be deducted.
However, you can increase the cost basis of your property by the amount of the
assessment. Refer to Publication 551, Basis of Assets, for more information. Local benefit
taxes are deductible if they are for maintenance or repair, or interest charges related to
If a portion of your monthly mortgage payment goes into an escrow account, and
periodically the lender pays your real estate taxes out of the account to the local
government, do not deduct the amount paid into the escrow account. Only deduct the amount
actually paid out of the escrow account during the year to the taxing authority.
Deductible personal property taxes are only those based on the value of personal
property such as a boat or car. The tax must be charged to you on a yearly basis, even if
it is collected more than once a year or less than once a year.
Taxes and fees you cannot deduct on Schedule A include federal income tax, sales tax,
social security taxes, transfer taxes on sale of property, homeowner's association fees,
estate and inheritance taxes and service charges for water, sewer, or trash collection.
For more information on non-business deductions for taxes, see the Form 1040
instructions or refer to Publication 17, Your Federal Income Tax.
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