Can I Deduct Property Taxes?

Property taxes are a significant expense for homeowners, and they are deductible on your federal return with one important limitation. The state and local tax deduction, which covers property taxes along with state income or sales taxes, is capped at $10,000 per year per household. This cap affects homeowners in high-tax states the most, since their property taxes alone may exceed that limit. You need to itemize your deductions to claim this, and it only benefits you when your total itemized deductions exceed your standard deduction. Property taxes on rental properties are handled differently and are fully deductible as a business expense on your rental schedule.