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Can Homeowners Still Deduct Their Property Taxes?

[Updated: Nov 09, 2020] Sep 11, 2019 by Maurie Backman
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The Tax Cuts and Jobs Act brought a lot of changes to the U.S. tax code when it was implemented in 2018. Some changes were good, and some not so good. But many feel that homeowners got the raw end of the deal.

Not only did the act limit the extent to which homeowners can deduct mortgage interest, but it also changed the way property taxes are deductible.

If you're a homeowner, the good news is that the tax code still allows for the deduction of property taxes. But whether you get to deduct yours will depend on your tax scenario.

How the SALT deduction works

The state and local taxes (SALT) deduction encompasses state income taxes as well as property taxes. Prior to 2018, the SALT deduction was unlimited. That largely benefited filers in high-tax states like New York, New Jersey, and California. But once the Tax Cuts and Jobs Act went into effect, the SALT deduction was capped at $10,000.

Here's what that means: Let's say you pay $8,000 in state income taxes and another $8,000 in property taxes in 2019. Under the old rules, you'd be eligible for a $16,000 deduction, but under the new rules, you're limited to $10,000.

Therefore, although you can deduct property taxes, if you live in a state where they're high, you may not manage to deduct all of them. Similarly, if you pay a lot in state income tax, that sum alone could eat up your entire $10,000 allowance, thereby leaving you with no room to deduct a portion of your property tax bill.

Getting property tax relief

The fact that property taxes aren't deductible in the way they used to be has hurt many homeowners. If that's the scenario you're in, one option is to fight to lower that burden by appealing your property taxes.

Your property tax bill is a function of your home's assessed value times your city or town's tax rate. Homeowners have the right to appeal their property taxes. Once you receive your next assessment or tax bill, see if you think the assessed value is reasonable. If it's not, find the deadline for appeals. You may get just a narrow window -- like 30 days -- to take action. Then gather evidence in support of your claim.

For example, if your home's assessment comes in at $400,000, but three comparable properties in the surrounding five-block radius recently sold for $350,000, that's reason to argue that your assessment is off.

Weigh your tax-filing options carefully

The goal of the Tax Cuts and Jobs Act was supposedly to put more money into taxpayers' pockets. To this end, it did lower most individual tax brackets. One unwelcome side effect, however, was the limited SALT deduction. If that change hurts your ability to write off your property taxes, your next best bet may be to see about having them lowered.

At the same time, remember that only filers who itemize get to claim the SALT deduction. Since the standard deduction has pretty much doubled under the Tax Cuts and Jobs Act, you can now claim $24,400 as a married couple filing jointly. This means that if you're limited to a $10,000 SALT deduction and don't have any other items to deduct other than your mortgage interest, itemizing may not be worth it -- unless, of course, your mortgage interest exceeds $14,400.

Either way, before you gear up to deduct your property taxes, run the numbers to see if itemizing makes sense. What you lose from that deduction you may gain back from a higher standard deduction.

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