I have a simple question about deducting property taxes on form 1040.?
Greetings, I've always been able to figure out my own taxes with no problems or questions, but last summer I bought my very first home. As I puzzle over the tax forms this year, and what I can deduct, I have some questions: #1: Can I deduct on my 1040 A Form (Itemized Deductions) the property taxes I paid in November of 2007? The entire amount I paid? Really? For example, back in November I paid a total of $1,898.64 ($711.01 and then an additional $1,187.63 for the supplemental assessed values.) Is this all deductable on this form? If so, what I don't understand is when IRS eventually sends this same amount back to me, then it's like I'm not really paying these property taxes at all. (Not if I get the money back from the IRS.) That can't be right. I can't believe that my property taxes are all deductable. #2... Is any amount of the $270.00 each month I pay for my Association Dues deductable? Thanks in advance for any help.
Public Comments
- you have to itemize deduction using the 1040 long form & Sched A to POSSIBLY get any benefit from property taxes and mortgage insurance - all your itemized deductions must exceed the standard deduction (approx 5300 for a single filer) in order to get any additional benefit assoc dues ARE NOT deductible
- As long as you're filing a long form schedule A you can deduct 100% of your property taxes. And no, you don't get 100% of it back as a tax refund. If your refund was similar in dollar amount to your property tax payments that was pure coincidence. It doesn't matter when during the year you pay those taxes, they're always deductible in the year paid. The association dues might be partially deductible if you use your home for business purposes but I can't think of another reason why they would be able to be deducted on a schedule A, C or wherever.
- The amount is deductible only if you have enough itemized deductions. Otherwise you use the standard deduction based on your filing status (single, married join, etc). To question # 2, you're confusing a deduction with a credit. With a deduction, you reduce your taxable income, not your tax. So if you're in the 25% tax bracket and you're total itemized deductions are $20,000, your taxes are reduced by $5,000. A credit is a dollar for dollar reduction in your income taxes. This is not a credit, but a deduction.
- You can deduct your property taxes. All of it. But you don't get it back! It just comes off your taxable income. Example: $25,000.00 income less $1898.64 = $23,101.36 taxable income. So you just pay taxes on a lower amount than you would have. HOA dues are not deductible. If you had mortgage insurance charged it is deductible for 2007 - this is a new deduction- only for 07. I am not talking about your homeowners insurance for fire- but for PMI. Good luck!
