Talking to Buyers About Property Tax Deductions

When homebuyers think about the cost of purchasing a property, they often focus on the sale price, down payment, and mortgage. But there’s another important aspect that can save them money—property tax deductions. If you’re a real estate agent or working closely with buyers, explaining these potential tax benefits can build trust and help clients make more informed decisions.

This guide will walk you through how to talk to buyers about property tax deductions in a clear, helpful, and professional way.

What Are Property Tax Deductions?

A property tax deduction allows homeowners to subtract some or all of their local real estate taxes from their federal taxable income.

Why It Matters

This deduction can reduce the amount of income taxed by the federal government—leading to lower tax bills for the homeowner.

Basic Eligibility

• Must own the home and have paid property taxes during the year.
• The home must be the primary residence or a second home (not a rental).
• Itemised deductions must be filed on the federal tax return.

How to Explain This to Buyers

Use Simple Language

Buyers aren’t tax experts. Avoid jargon and explain it like this:

“Property tax deductions let you reduce the amount of income the government taxes, based on the taxes you pay to your local county.”

Highlight the Financial Benefit

Show them how it might save them money during tax season. You don’t need to give exact numbers—but help them understand it’s a yearly potential saving.

What Buyers Should Know Before Claiming Deductions

The $10,000 SALT Cap

Since the 2018 tax reform, there’s a cap on State and Local Tax (SALT) deductions:

• The limit is $10,000 for single and married couples filing jointly.
• This includes both state income taxes and property taxes combined.

They Must Itemise Deductions

Buyers need to itemise their deductions instead of taking the standard deduction. This usually makes sense for higher-income earners or those with larger homes.

It Applies to Primary and Second Homes

Buyers can deduct property taxes for a primary residence and one secondary residence—but not investment properties.

Common Questions Buyers Might Ask

Can I Deduct Property Taxes in the Year I Buy the Home?

Yes—but only the portion of the tax the buyer paid after closing. The seller and buyer typically split the property taxes.

Are Escrow Payments Deductible?

Only the portion of your monthly escrow payment that goes toward paying property taxes is deductible — not the entire amount.

What If the Property Taxes Are Paid Late?

Buyers can only deduct the amount actually paid in that tax year—so if it’s late, they claim it for the year it’s paid.

How Real Estate Agents Can Help Without Giving Tax Advice

Educate, Don’t Advise

You’re not a tax professional—so always make that clear. However, you can still:

• Point buyers to IRS guidelines.
• Recommend they speak with a certified tax advisor.
• Share general insights that help them prepare.

Provide Useful Tools or Resources

• IRS Publication 530 (Tax Information for Homeowners)
• Online property tax calculators
• Local assessor’s office for current rates

Why This Conversation Builds Trust

Helping buyers understand the full financial picture — not just the cost of buying, but the ongoing benefits too — positions you as a valuable advisor.

When you can confidently explain deductions, exemptions, and common questions, you:

• Earn your client’s trust
• Add extra value to your service
• Build long-term relationships

Conclusion:

While you’re not a tax advisor, being able to clearly explain property tax deductions shows buyers that you’re looking out for their best interests. It’s one more way you can go above and beyond in helping them feel confident and financially informed as they buy their home.

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