Deducting property taxes paid from your income taxes

If you are itemizing deductions on your 2014 federal income tax return, you can deduct property taxes paid during 2014 on real property (land and structures) that you own.

Local fees are a different matter. IRS Publication 530 says that “itemized charges specific to property or people,” cannot be deducted because they are fees not taxes, even if they are paid to a taxing authority. The publication lays out specific examples of nondeductible fees, stating that “a periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection)” is nondeductible. Payments for Decatur’s residential sanitation and stormwater utility may fall into this category of nondeductible charges. For a single-family home in Decatur in 2014, the residential sanitation charge was $237, and the stormwater charge was $75. Other nondeductible payments include penalties and interest on delinquent taxes paid if applicable. Tax payments toward the five funds listed on Decatur tax bills (capital, DDA, bond, the general fund, and school taxes) are deductible.

If you are deducting real estate taxes paid from your income taxes, you’ll want to keep a copy of your second installment Decatur property tax bill, which is a restatement of your total taxes owed and paid for the year (and a copy of your DeKalb tax bill) in your income tax file. You can access a bill reflecting your payments or a receipt at www.decaturgatax.com.

This blog post is intended solely to bring awareness of the distinction that the IRS draws in its publications on the property tax deduction, and is not intended as instructions on how you should file or how much you should deduct. Since individual circumstances vary, please contact an income tax professional for verification and further guidance.