Can You Write Off Property Taxes on a Rental Property?

Yes, you can write off property taxes on a rental property, and you deduct them in full on Schedule E as an expense against your rental income. Unlike the property tax deduction homeowners take on Schedule A, rental property taxes are not subject to the state and local tax (SALT) cap, so the full amount attributable to the rental comes off your rental income no matter how large the tax bill.

To claim the deduction, the property has to be held to produce rental income rather than for personal use, and you have to be the person legally responsible for paying the tax. Paying a relative’s property tax bill on a home you don’t own won’t give you a deduction, because the tax liability isn’t yours. Hold on to the deed and your annual tax bills so you can show both.

What Counts as a Deductible Property Tax

The recurring taxes your county or municipality charges based on your property’s assessed value, known as ad valorem taxes, are deductible in the year they are paid. These are the main line item on your annual tax bill and fund schools, roads, and general government services.

Special assessments work differently. Charges for building new sidewalks, extending sewer lines, or installing water mains are not immediately deductible because the IRS treats them as improvements that add lasting value to the property.¹ You add those costs to the property’s basis² and recover them through depreciation over 27.5 years for a residential rental.³

There is one exception. If a special assessment specifically covers maintenance or repair of existing infrastructure rather than new construction, you can deduct it in the year you pay it.⁴ Read the bill carefully. The distinction between an improvement assessment and a maintenance assessment decides whether you deduct the cost now or spread it over decades.

Where to Report Rental Property Taxes

Rental income and expenses go on Schedule E (Form 1040).⁵ Property taxes are entered on line 19, which captures ordinary and necessary expenses not listed on the preceding lines.⁶ Reporting the tax on Schedule E rather than Schedule A reduces your adjusted gross income directly, which is more valuable than an itemized deduction because AGI drives eligibility for other credits and phaseouts.

The SALT Cap Does Not Apply

For personal property taxes on Schedule A, federal law caps the combined state and local tax deduction at $40,400 for 2026 ($20,200 if you’re married filing separately). The statute explicitly exempts taxes paid while carrying on a trade or business or producing investment income from that cap.⁷ Because rental property taxes are business or investment expenses on Schedule E, they aren’t limited. You can deduct the full rental-attributable amount, no matter how large. Just don’t claim the same taxes on Schedule A. Double-counting is one of the fastest ways to trigger a notice.

Escrow Payment Timing

If your lender collects property taxes through a monthly escrow payment, your deduction is not the amount you pay into escrow. It is the amount the lender actually disburses to the local taxing authority during the tax year.¹ The year-end statement from your lender or the tax office will show that disbursed amount. Escrow accounts often hold a cushion above what’s owed, so the two figures rarely match.

Splitting Taxes on Mixed-Use Property

If you live in part of a property and rent out the rest, such as a duplex where you occupy one unit, you have to divide property taxes between rental use and personal use. Only the rental share goes on Schedule E. The IRS accepts any reasonable allocation method, and the two most common are dividing by the number of rooms or by square footage.³ For a duplex with equally sized units, half of the total tax goes on Schedule E and the other half on Schedule A (subject to the SALT cap).

For a vacation home you also use personally, the allocation is based on days. Divide rental days by total days used (rental plus personal), and apply that fraction to the total property tax. The rental share is deductible on Schedule E and the personal share on Schedule A.

One boundary to be aware of: if you rent out a home you also use personally for fewer than 15 days during the year, the IRS does not treat it as rental activity. You don’t report the rent as income, and you don’t deduct any rental expenses.³

Proration When You Buy or Sell

When a rental changes hands, the annual property tax is split between buyer and seller based on how many days each owned the property during the year. Divide the days you held the property by 365 (or 366 in a leap year), then multiply by the total annual tax.⁸ The rule applies regardless of who wrote the check, even when the buyer paid the full bill at closing through an escrow adjustment.

The Closing Disclosure from settlement typically shows the proration as a credit or debit between the parties. Keep it. The dollar amounts on that form are what support the deduction on your return, and neither party can deduct tax for the portion of the year they didn’t own the property.

When the Tenant Pays the Tax

Some leases require the tenant to pay property taxes directly to the local government. When that happens, you include the amount the tenant paid as rental income and then deduct the same amount as a property tax expense.⁹ The net effect on your return is zero, but both sides of the transaction have to appear. If you skip the income side, the payment can still show up under your property in local records and prompt IRS questions.

If the Rental Runs a Loss

Deducting property taxes and other expenses is straightforward when the rental turns a profit. It gets more complicated when expenses exceed income and the rental produces a loss. The IRS classifies most rental activity as passive, and passive losses generally cannot offset wages, salary, or other nonpassive income.¹⁰

The $25,000 Special Allowance

If you actively participate in managing the rental, meaning you make decisions like approving tenants, setting rent, or authorizing repairs, you can deduct up to $25,000 of rental losses against your other income. The allowance phases out as your modified adjusted gross income (MAGI) rises above $100,000. For every $2 your MAGI exceeds $100,000, the allowance drops by $1. Once MAGI reaches $150,000, the allowance is gone. Married filing separately taxpayers who lived with their spouse at any time during the year cannot use the allowance at all.¹⁰

Losses You Cannot Use This Year

Rental losses beyond the $25,000 allowance, or losses you can’t use because your income is too high, are not lost. They carry forward to future tax years and can offset passive income you earn later, or you can claim them in full when you sell the property in a taxable transaction.¹¹ Passive activity limitations are reported on Form 8582. Keep records of any carried-forward losses so you can apply them in later years.

Real Estate Professionals

If you qualify as a real estate professional, your rental activities aren’t automatically passive. Qualifying takes more than 750 hours during the year in real property businesses where you materially participate, and those hours have to be more than half of all the personal services you perform across all your work.¹⁰ Meeting that standard lets you deduct rental losses without the $25,000 cap or the MAGI phaseout. Hours as an employee in real estate generally don’t count unless you own more than 5% of the employer.

Foreign Rental Property

Property taxes on a rental located outside the United States are deductible on Schedule E. Federal law allows a deduction for foreign real property taxes and specifically exempts taxes paid while carrying on a trade or business or producing investment income from the restrictions that otherwise block the foreign property tax deduction for personal use.⁷ Foreign property taxes on a personal residence are currently not deductible on Schedule A at all, so the rental-use distinction is a meaningful benefit for owners of overseas investment property.

1
Internal Revenue Service. Publication 530 (2025), Tax Information for Homeowners
2
Internal Revenue Service. Publication 551 (12/2025), Basis of Assets
3
Internal Revenue Service. Publication 527 (2025), Residential Rental Property
4
Internal Revenue Service. Topic No. 503, Deductible Taxes
5
Internal Revenue Service. About Schedule E (Form 1040), Supplemental Income and Loss
6
Internal Revenue Service. 2025 Instructions for Schedule E (Form 1040)
7
Office of the Law Revision Counsel. 26 USC 164 – Taxes
8
Internal Revenue Service. Publication 523 (2024), Selling Your Home
9
Internal Revenue Service. Tips on Rental Real Estate Income, Deductions and Recordkeeping
10
Internal Revenue Service. Publication 925 (2025), Passive Activity and At-Risk Rules
11
Internal Revenue Service. Instructions for Form 8582