Taxpayers can deduct certain taxes paid throughout the tax year on schedule A (itemized deductions). These taxes must be paid between January 1st and December 31st if you are a calendar year taxpayer. Some of the taxes deductible are:
● Real estate taxes (can include multiple properties)
● Personal property taxes
● State income tax / sales tax
When deducting taxes paid, the taxpayer can take either the state income taxes paid or sales taxes paid, whichever is higher. You cannot deduct both. The IRS has sales tax tables that show how much taxpayers can deduct based on their income and the sales tax rate where they live. If a taxpayer makes a major purchase subject to sales tax, that amount is added to the IRS sales tax table amount.
With the new tax reform, taxpayers are unable to deduct schedule A taxes paid in excess of $10,000.
Taxes NOT deductible are:
● Federal income taxes
● Social security taxes
● Stamp or transfer taxes
● Homeowners association fees
● Estate/inheritance taxes
Also deductible on schedule A is mortgage interest. Taxpayers can deduct interest paid on the mortgage for a personal residence and a second home. Each taxpayer is limited to $500,000 in debt, and certain taxpayers may be able to deduct mortgage insurance premiums or home mortgage points.