• The taxes paid to local and state governments on property come with some income tax deduction benefits for homeowners and small businesses.TAX TIME image by brelsbil from Fotolia.com
  
  Homeowners generally do not consider property taxes something to be happy about. Generally, a high property tax means an even bigger obstacle to buying and keeping a home or investment property. High property taxes have a silver lining, however, which lies in their income tax benefit.
  
  

Deducting Home Property Taxes

• One of the benefits of high property taxes lies in the fact that that you can deduct them on your income tax filing. The larger the property tax, the larger the deduction. Often, this ability will result in a lower income tax bill. In order to allow for a deduction, the property tax must be based on an assessment of the home's value. You can also deduct special-benefit property taxes like those on sidewalks, sewers or roads---but only if these benefits are assessed as part of the value of the home. In order to qualify for this deduction, your property taxes must undergo an assessment according to a standard formula for the area where you live, rather than on a case-by-case basis. For most jurisdictions, taxes are assessed uniformly. If you pay property taxes through a mortgage company, look for the amount eligible for deduction on the 1099-INT form provided by the mortgage company.
  
  

Tax-Free Service Benefits

• Property taxes charged by local governments are fully deductible service charges. In some areas, property taxes finance services such as water and sewer upgrades and improvements, whether the owner uses them or not. If these services were financed by a delivery charge---such as a utility bill---rather than high property taxes, they would not be deductible under IRS rules. But because property taxes are fully deductible, having these services paid for by a high property tax can save homeowners money on their income tax returns.
  
  

Small Business Tax Benefits

• High property taxes are also an income tax deduction for businesses. Businesses are able to deduct all of the property taxes they pay on the facilities they own, such as their offices, stores, and other facilities. Small businesses can also deduct home property taxes if operated as a home business, but this deduction only applies to the portion of the home that serves as a place of business.
  
  

Standard Deduction Benefit

• In recent years, the federal government has also made it possible to add high property taxes to a standard deduction. The standard deduction is an income tax break available for people who incur a number of various deductions---such as donations to charity and mortgage expenses---but do not want to spend the time or money itemizing each individual expense on their tax return. In the past, these taxpayers could not claim high property taxes on their return. In 2008, however, it became possible to deduct property taxes without filing an itemized return, leading to a larger income tax benefit.