What this line means
Real estate taxes (property taxes) paid on your rental property during the tax year. This is the annual tax assessed by your local government based on the property’s assessed value. If the property is held solely for rental use, the full property tax goes here. If the property is mixed-use (part rental, part personal), allocate the tax based on the rental-use percentage.
Does this apply to you?
- You own a rental property and pay annual property taxes to a county or municipality
- You pay property taxes through a lender escrow account on a rental property
- You own a mixed-use property and allocate property taxes between personal and rental use
- You paid special assessments on a rental property for local improvements
Easy to overlook
Property taxes on rental property go on Schedule E, not Schedule A The $10,000 SALT deduction cap on Schedule A does not apply to rental property taxes. Property taxes on investment property are a business expense on Schedule E line 16 with no cap. Landlords who also own a personal residence sometimes put all property taxes on Schedule A, hitting the $10,000 cap unnecessarily while losing the uncapped Schedule E deduction. 1 IRS Publication 527 — Residential Rental Property
Escrow payments are not the same as taxes paid Your monthly mortgage escrow payment includes property tax reserves, but the deductible amount is the tax actually paid to the county — shown on your year-end property tax bill or your lender’s annual escrow statement. Escrow payments and actual tax disbursements often differ, especially in the first and last years of a mortgage. Use the amount actually disbursed to the taxing authority. 2 General filing pattern — double-deduction of property taxes on Schedule A and Schedule E
Watch out for this
Deducting the same property taxes on both Schedule A and Schedule E. If a rental property’s taxes are deducted on Schedule E line 16, they cannot also appear on Schedule A. This is the most common double-deduction error for landlords who itemize. Tax software sometimes auto-imports property tax data to Schedule A from a 1098, requiring manual correction to move it to Schedule E.
Footnotes
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IRS Publication 527, Residential Rental Property, Taxes. https://www.irs.gov/pub/irs-pdf/p527.pdf ↩
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IRS Publication 530, Tax Information for Homeowners, Real Estate Taxes. https://www.irs.gov/pub/irs-pdf/p530.pdf ↩