Are Taxes Paid a Deduction for Real?

Magnifying glass over the word tax on form 1040

You pay taxes on just about everything, from your income to your home to the groceries you buy at the store. But did you know you can deduct some of those taxes paid from your federal income tax return? Yes, for real, you can deduct taxes from your taxes.

State and Local Income Tax or Sales Tax

Every year, you pay income taxes on the state and local level as well as the federal level. If you pay a balance due or estimated tax payments during the tax year for those state and local taxes, you can deduct that amount from your federal tax return. Or, you can deduct state and local general sales taxes that you paid for purchases during the tax year. You cannot, however, choose both deductions. It’s either the income tax or the sales tax deduction, and the limit for the deduction is $10,000, including any real estate taxes you deduct.

**Keep in mind: Foreign income taxes may also be deductible or taken as a tax credit.

Real Estate Tax Deduction

Owning a home can be expensive, but there can also be tax advantages. One of those advantages is the real estate tax deduction for any homes you may own. There is no limit to the number of homes for this deduction, but you cannot include charges for services like sanitation and water, and you must exclude any refunds or rebates you may have received on your real estate taxes.

Personal Property Tax Deduction

Not to be confused with the real estate tax deduction is the personal property tax deduction. Personal property is anything you own that is movable, such as a car, furniture, art, etc. Personality property tax deductions must be based only on the value of the property and be charged on a yearly basis.

Which Taxes Paid Are Not a Deduction

While it may be exciting to find out that you can deduct taxes from your taxes, there are some that can’t be deducted. They include federal income tax, business taxes, social security and Medicare taxes, and foreign property tax.

Itemized deductions like taxes paid can reduce your tax bill. Reach out to us today to find more ways to reduce your taxes.

**Please keep in mind: Tax laws, eligibility requirements and rates change often, and these lists are not exhaustive. Always contact a tax preparer for the most up-to-date information.