A Physician’s Guide to Property Tax Deduction In 2025

One of the tax benefits of owning a home is a property tax deduction, which allows physicians to save more money yearly.

However, many doctors don’t know how to tap into their property taxes to reduce their local taxes.

If you’re a first-time homeowner or a physician who would like to maximize your property taxes for more savings, here’s a quick guide on property tax deductions.

What Is Property Tax Deduction?

A property tax deduction, also called a real estate tax deduction, lets you deduct your property taxes from your federal income taxes.

Eligible homeowners can deduct their property taxes on their primary home, vacation home, or land if these properties are for personal use and if they’re based on the property’s assessed value.

These deductions include the taxes paid during the closing date of the property you bought or sold.

However, note that you can’t deduct your property taxes using the standard deduction.

You must use itemized deductions to write off your state and local real estate taxes.

What Are Assets Considered Property Taxes Deductible?

The following properties qualify for property tax deductions:

• Primary residence
• Vacation home
• Some investment or rental properties
• Land
• Cars and other vehicles
• Boats

What Assets Are Not Eligible for Tax Deduction?

Here are real estate items and payments you can’t include in your property tax deductions:

• Unpaid property taxes
• Taxes paid on a property you don’t own
• Property taxes paid on commercial or rental property
• Transfer taxes for selling a house
• Expenses for home renovations and local improvement construction
• Costs for utilities and services like trash collection

How Much Property Taxes Can You Deduct?

The Tax Cuts and Jobs Act capped the property tax deductions to $10,000 per tax year for individuals or married couples filing jointly and $5,000 per tax year for married filing separately.

Besides property taxes, this limit includes sales taxes and state and local income taxes.

As a result, you’ll fill the maximum deductible amount quickly and may not even use the full amount of your property taxes.

Note that you can’t deduct property taxes if it’s not an itemized property tax deduction.

Property Tax Deductions for Physicians

Explore the following tax reduction strategies for your property tax deduction.

SALT Tax Deduction

Taxpayers who itemize their federal taxes can deduct their income, sales, and property taxes through the state and local tax (SALT) deduction. However, you can’t simultaneously deduct the income and sales taxes in the same year.

The SALT deduction only applies to primary or secondary residences. You must also itemize it to claim this deduction.

The deduction has a $10,000 limit, but this expires by the end of 2025.

As of writing, there is yet no news if lawmakers will renew or modify the cap.

Mortgage Interest Deduction

A mortgage interest deduction lets you deduct the loan interest you paid for buying, building, or improving your property from your tax return.

However, this deduction only applies to primary or secondary residences and loans up to $750,000 (for married couples filing together) or $375,000 (for married couples filing separately).

Your mortgage company provides a report of your deductible mortgage interest, enabling you to reduce your tax bill.

However, you must itemize the deductions to claim this benefit.

Mortgage Points Deduction

If you paid mortgage points during the closing date to reduce your loan’s interest rate, you can deduct the full amount of the points during the year you paid them.

A mortgage point equals one percent of the loan amount.

If your loan is $100,000, one point equates to $1,000, which you can add to your tax deductible.

Here are the following requirements to qualify for a mortgage point deduction:

• The mortgage must be used for a primary home.
• Using the points must be normal practice and the amount should be reasonable for your area.
• You must use cash accounting.
• It can’t be used for stand-alone fees, such as property tax.
• You must have paid for the points yourself.
• The amount must be itemized as points in your loan documents.

To deduct the points, check the Form 1098 sent by your lender and transfer the amount you paid to line 8a of Form 1040 Schedule A.

Accelerated Depreciation

This depreciation method allows you to reduce an asset’s book value faster, resulting in greater reductions in value in its earlier years.

You can use the cost segregation method to identify and separate assets that you can depreciate over a shorter period.

These assets can include fixtures, landscaping, or appliances.

How to Claim a Property Tax Deduction

Here’s a three-step guide to deduct property taxes from your income tax return.

Gather and Check Your Tax Records

Collect and review all your tax documents and expense-related paperwork to see what you paid in a given year and what you can deduct for the following year.

Check the tax bill provided by your local government. If you haven’t received a copy, ask for it through your local tax authority.

Besides this, review your mortgage statement (Form 1098) to check your property tax payments.

If you also bought a vehicle, boat, RV, or other movable asset, check the registration paperwork to see if you’re paying property taxes for these.

The portion of the vehicle’s value may be considered tax deductible.

Note that you can only include property taxes paid in the same tax year.

Also, calculate your taxes carefully and see if you’ll get more savings through an itemized deduction than a standard deduction.

Check Your Escrow Account

If you’re using an escrow account for property tax payments, check your Form 1098 to see the real estate taxes paid by your lender on your behalf. You may deduct them from your income tax.

Use Schedule A to File Your Income Tax Return

After gathering your documents, checking the property taxes paid, and confirming your deductions, get and complete Form 1040 Schedule A from the IRS to claim the property tax deduction.

You must fill out the amount of property taxes paid, your county, and your property number.

Again, you need to itemize your taxes instead of a standard deduction.

An itemized deduction takes time to prepare, but it can provide a lower tax bill.

Finally, file the form along with your annual tax return. If you have any concerns, don’t hesitate to ask a tax professional for help and guidance.

Tips to Get More Property Tax Deductions

Follow these best practices for a smooth filing of your taxes.

• Confirm If You’re Eligible: To avoid common tax errors for physicians, learn the regulations to confirm your eligibility for a property tax deduction. Specifically, know the requirements and limitations for certain types of deductions. Generally, homeowners who pay property taxes usually qualify for a real property tax deduction. 
• Add Other Property Tax Deductions: When itemizing your property taxes, don’t forget to list other assets, like cars, boats, and other real estate that qualify for a property tax deduction.
• Read Your Closing Paperwork Thoroughly: Go over the property taxes you paid during closing and list down each payment, so you don’t miss anything. You may get a second tax bill if the assessor revalues your property. Also, keep all your paperwork organized to avoid missing documents.
• Check Your Registration Statements: When renewing your vehicle registration, check if a part of your payments is property tax. If it’s part of the cost breakdown, you may add it to your tax deduction.
• Prepay Property Taxes: If you haven’t reached the maximum deduction for the current tax year, you may prepay your property taxes to reduce your expenses next year and save more money. 
• File Your Income Tax Return on Time: Always file your taxes on or before the deadline to avoid penalties that can increase your tax liability, such as interest charges.

Frequently Asked Questions

Consult With a Tax Professional

Taxes can be tricky for doctors, depending on your tax situation. If you’re unsure how to claim property tax deductions or if an itemized deduction suits your finances best, consult a Financial Advisor for proper tax planning.

Physicians Thrive’s Financial Advisors are equipped to help and guide physicians regarding their finances, including paying off student loans, reaping tax benefits, starting a private practice, and more.

Don’t hesitate to contact our Financial Advisors and get help with tax planning today!