What to know about property taxes and standard deductions

Dec 30, 2020 | Tax Concepts

It’s that time of year again. Property tax season. 

Every December, property tax bills are mailed. The bill you receive is due by Jan. 31 of the following year and has the option to be paid in two installments–one by January and the other in July. I get a fair amount of people asking if it makes sense to pay two years of property taxes in one calendar year to increase their likelihood of itemizing. The answer is a complicated one with many factors to consider.

The most important factor to consider is the amount of your property taxes due. The taxes must be on your first residence and possibly second home–rental property and commercial property taxes are deducted on their respective Schedule E or Schedule C. But if you have a high enough amount of property taxes, it may make sense to pay them and attempt to qualify for itemizing your deductions. 

Your taxes alone will not allow you to itemize; it is a combination of factors that will ultimately allow you to itemize. Please also note that property taxes are capped at $10,000 to be deductible; if you pay more than $10,000 a year, paying two payments would not help you in any way. If you currently have a mortgage, you will also be able to deduct the interest on your mortgage. With a home equity line of credit, the interest is deductible as well, as long as the funds were used to improve your home

Standard Deduction Figures

  • Single or married filing separately – $12,400
  • Married filing joint – $28,400
  • Head of household – $18,650
  • 65 or older and single –  $1,650 increase in standard deduction for 2020
  • Married filing jointly and one person is 65 or older – $1,300 increase in standard deduction for 2020
  • Married filing jointly and both people are 65 or older – $2,600 increase in standard deduction for 2020

The Tax Cuts and Jobs Act (TCJA) changed the nature of itemized deductions on your Schedule A. This was done in combination with the increased standard deduction to reduce the number of people who itemize on their tax return. 

If you would like to discuss your personal situation to determine whether or not you should make an additional payment, please contact Anna by email or schedule an appointment here. You can set up a short meeting to answer any questions you may have and make any payments by year end.

Because of the strength of the housing market this year, you may also be in the group of people who sold a home in 2020. If you sold your home, here’s a blog to fill you in on what to know about how it could affect your property taxes. 

Anna Lautenbach, CFP®, MAcc, EA

Anna Lautenbach is a Certified Financial Planner (CFP®) and has Master’s degrees in both Accounting and Management, giving her a unique, well-balanced perspective on taxes. On the Simplifying Taxes Blog, she covers everything from tax strategies to employ to important tax concepts to understand.