Deductions & credits

Line 5c asks for the amount you paid in state and local personal property taxes. This includes state and local taxes you pay on things like a car, boat, or other personal belongings, if such taxes were based on value alone and were imposed on a yearly basis.

For Example: If you paid a yearly fee for the registration of your car. Part of the fee was based on the car's value and part was based on its weight.  You can deduct only the part of the fee that was based on the car's value. 

If you end up paying personal property taxes to your local government, the IRS will allow you to claim a deduction for it on your federal tax return. 

However, the IRS requires you to satisfy certain requirements, regardless of how your government classifies the tax.

To claim the deduction:

• the tax must only apply to personal property you own, 
• be based on its value and 
• be charged on an annual basis, irrespective of when the government collects it from you. 

Therefore, if the state only charges the tax at the time you purchase the property, then it does not meet the IRS definition of a deductible personal property tax.

State Tax Refund Worksheet item Q Line 2 is your refund received in 2022 for state or local taxes paid. 

Your state or local tax refund is not taxable if you did not itemize your deductions in the prior year. However, the refund would be taxable if you got a tax benefit for the deduction in a prior year. 

Note this is not the same thing as real property taxes claimed on your tax return, Schedule A.

Homeowners who itemize their tax returns can deduct real property taxes they pay on their main residence and any other real estate they own.

• This includes property taxes you pay starting from the date you purchase the property.
• The official sale date is typically listed on the settlement statement you get at closing.

Click here for an article on What Are Personal Property Taxes?

Click here for information on claiming property tax