Nonbusiness taxes include state and local income and personal property taxes.
State Income Tax
You may deduct your state and local income taxes on your Federal return up to a combined total of $10,000 in 2019 (including property taxes). If you pay the estimated state income taxes, typically due on January 15, by December 31, you can take a larger Federal deduction for the current year.
However, if you are subject to the alternative minimum tax (AMT) this year, you may not benefit from nonbusiness tax deductions since you cannot deduct state taxes for AMT purposes. Please contact us before prepaying any taxes.
If you don't make estimated tax payments, ask your employer to withhold more state tax in the calendar year, which will increase your deduction. If you overpay, intentionally or not, the IRS will tax any refund you receive from the state up to the amount you benefited from a Federal deduction in the prior year.
Property owners must pay personal property taxes on the value of their property, whether it be real estate, cars, or motor homes. While property taxes can be burdensome, they are deductible on your Federal tax return. While paying property taxes before December 31 could give you a greater deduction in the current year, be aware of any AMT implications.
Real estate taxes are deductible. However, registration, licensing, and other fees are not deductible. Special real estate assessments are also not deductible because you derive specific benefits from them.
Buying or selling a home will affect your real estate tax deductions. Be sure to keep closing statements on which the apportionment of the taxes between the buyers and sellers is shown; they'll help you calculate the deductions.