If you itemize deductions on your federal tax return, you may be able to claim a deduction for the personal property taxes you've paid.
When you can deduct personal property tax
If you end up paying personal property taxes to your local government, the IRS allows 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.
How to deduct personal property taxes
Paying a personal property tax is not always enough to claim the deduction. In addition to satisfying the IRS requirements, you must also be eligible to itemize, since this is the only way you can claim the deduction.
To determine whether you are eligible to itemize, simply add up all of your eligible itemized deductions for the year, such as medical expenses, charitable contributions and mortgage interest payments. If the total is more than the standard deduction you can claim for your filing status, then go ahead and itemize and take a deduction for your personal property tax payments.
Beginning in 2018, deductions for state and local taxes, including personal property taxes, are capped at $10,000 per tax return. Prior to 2018, there is not a cap for these deductions, although large amounts of these deductions can cause you to be subject to the Alternative Minimum Tax and therefor offset a large deduction.
