Taxes for buyers · IRS Schedule AProperty tax deduction after buying a home: the $40,000 SALT cap and what counts
Homeowners who itemize can deduct state and local real estate taxes on Schedule A, together with state and local income (or sales) taxes and personal property taxes – but the total is capped. For 2025 returns the cap rose to $40,000 ($20,000 if married filing separately). It shrinks when modified adjusted gross income is over $500,000 ($250,000 married filing separately): the worksheet takes 30% of the excess off the $40,000, but the cap never goes below $10,000 ($5,000). Only taxes assessed uniformly at a like rate on all property in the community and used for general public purposes count. Itemized charges for services – trash pickup, water by the gallon – don't, and assessments for improvements such as a new sidewalk aren't deducted but added to the home's basis. If the mortgage payment includes taxes, only what the lender actually paid to the taxing authority during the year counts, not what went into escrow. Real estate taxes paid at closing appear on the settlement statement; a seller's share charged to the buyer shows in box 6 of Form 1099-S and is treated as a refund for the seller. Only taxes paid in the year and assessed before the next year can be deducted for that year. Itemizing helps only when total itemized deductions are larger than the standard deduction.
The SALT cap for 2025 returns
The cap
$40,000 for state and local income or sales, real estate and personal property taxes combined ($20,000 married filing separately).
Higher incomes
Above $500,000 MAGI ($250,000 MFS) the cap drops by 30% of the excess…
The floor
…but never below $10,000 ($5,000 MFS).
What counts as deductible real estate tax
- Taxes assessed uniformly at a like rate on all property in the community, used for general purposes.
- With an escrow account: only what the lender actually paid to the taxing authority that year.
- Taxes you paid at closing, as shown on the settlement statement.
What doesn't count
- Charges for services – a monthly trash fee, water by the gallon, a mowing charge.
- Assessments for improvements like a new sidewalk – added to the home's basis instead (repairs to an existing facility can count).
- Next year's taxes paid early if they weren't assessed before the next year.
- Foreign real estate taxes.
What the TC can do
- Send buyer and seller the final settlement statement after closing – the tax line is what their preparers need.
- Tell the seller the buyer-paid share of taxes shows on Form 1099-S, box 6.
- Point new owners to the escrow statement for the taxes the lender actually paid.
Questions homeowners ask
What is the SALT deduction limit for 2025?
$40,000 ($20,000 if married filing separately), reduced when modified AGI is over $500,000 ($250,000 MFS) but not below $10,000 ($5,000) – IRS Schedule A instructions for 2025.
Can I deduct the property taxes in my escrow account?
Only the amount your lender actually paid to the taxing authority during the year, not the amount deposited into escrow.
Can I deduct property taxes I paid at closing?
Yes, if you itemize – the taxes you paid at closing are shown on your settlement statement and count toward the SALT cap.
Are HOA dues or trash fees deductible as property tax?
Itemized charges for services to a specific property, such as trash collection, aren't deductible as real estate taxes.
Related guides and tools
ClosingCode's free property tax proration calculator splits the year's tax between seller and buyer by closing date – no sign-up.
Start free trialSource: IRS 2025 Instructions for Schedule A (Form 1040), Itemized Deductions – What's New, lines 5b and 5e and the State and Local Tax Deduction Worksheet (irs.gov/pub/irs-pdf/i1040sca.pdf, read October 26, 2026).
General information, not tax advice. ClosingCode is software; it is not a tax preparer or CPA. This guide is not a substitute for the advice or services of an attorney.