Property taxation is simply a levy assessed on property such as real estate. Real estate property taxes are typically assessed by county, state and local governments, instead of federal governments. Local authorities such as school districts, water and sewer companies also play a role.
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State and local governments greatly rely on the tax income acquired from property taxes. In fact, property taxes are usually the biggest source of their income. In many states, property taxes give out more revenue than sales and income taxes combined. The national government plays a small role in the collection of property taxes.
Real estate taxes are deductible on federal income tax returns. The more you pay in property taxes, the more you are able to write-off. In fact, there’s no limit on the property tax deduction. If you are a new homeowner you are able to deduct property taxes paid by the seller, that might have applied to your property tax debt. As the new homeowner, you are able to make this deduction, regardless of whether you reimbursed the seller or not.
Thanks to inflation and an inflexible tax code, those previously considered “wealthy” are now the middle class. As a result, millions of middle income American’s fall victim to the AMT each year. To make matters worse, property taxes are non deductible under the AMT. The good news is that recent AMT tax bill legislation can give middle class homeowners with much needed relief.