You may deduct state and local real estate taxes paid in 2025 on Schedule A (Form 1040), line 5b, but only if the taxes meet specific criteria. The taxes must be imposed by a state or local government, based on the assessed value of the property (ad valorem), levied uniformly at a like rate, and used for general governmental purposes. To be deductible for 2025, the taxes must have been both assessed and paid in 2025. Taxes paid in advance for a future year are not deductible if they were not assessed at the time of payment.
What You Can Deduct
- Taxes on real estate you own that is not used for business (business property taxes are deducted elsewhere).
- Only the amount actually paid to the taxing authority in 2025. If your mortgage company paid the taxes from an escrow account, you may deduct only the amount the lender actually paid to the taxing authority during the year.
- If you sold your home in 2025, real estate taxes are generally prorated between you and the buyer based on the closing agreement. You may deduct only the portion of the taxes that you are treated as having paid.
What You Cannot Deduct
- Foreign real estate taxes.
- Itemized charges for services to specific property or persons (for example, trash collection or water service).
- Assessments for improvements that increase property value (for example, construction of new sidewalks). These amounts must be added to your property’s basis rather than deducted.
- Deposits into escrow accounts that have not yet been paid to the taxing authority.
Refunds and Rebates
- If you received a refund or rebate in 2025 for real estate taxes paid in 2025, reduce your deduction by that amount.
- If you received a refund or rebate in 2025 for taxes paid in an earlier year, do not reduce your current deduction. Instead, include the refund as income on Schedule 1 (Form 1040), line 8z, to the extent the prior-year deduction reduced your tax (tax benefit rule).
Prepayment of Taxes
- Taxes paid in 2025 for a future year are not deductible if the tax was not assessed at the time of payment.
Source:
Schedule A
Disclaimer: Always verify details with the current IRS Form and Instructions, and consult a tax professional for personalized advice.