Under IRC §164, state and local taxes (SALT) including property taxes are deductible on Schedule A, but capped at $10,000 per year ($5,000 if married filing separately) for personal residences. For rental and business properties, property taxes are 100% deductible with no cap.
Getting the deduction right is not just about whether it is allowed — it is about how you set it up.
Personal: itemize on Schedule A. Rental/business: deduct on Schedule E or C.
Save property tax bills and payment receipts.
Personal: Schedule A (subject to $10,000 SALT cap). Rental: Schedule E. Business: Schedule C.
Do not exceed the $10,000 SALT cap on personal property taxes.
If you have rental properties, property taxes are fully deductible with no cap -- a significant advantage.
When structured correctly, this deduction can significantly reduce your taxable income.
Here is how this deduction typically works in real situations:
A homeowner pays $12,000 in property taxes on their primary residence.
An LLC pays $15,000 in property taxes on a rental property.
Owner tries to deduct $15,000 in personal property taxes.
Key Takeaway: The difference between a valid deduction and a denied one usually comes down to documentation, usage percentage, and proper structuring. The same expense can be fully deductible, partially deductible, or not deductible at all — depending on how it is handled.
Yes -- up to $10,000 for personal residences (SALT cap). Rental and business property taxes are 100% deductible.
