- Homeowners and property owners must pay taxes on their property, which are tax deductible for income tax purposes. If you own a home in the U.S., you likely pay state, county and city property taxes, as well as school taxes to the school district in which you live. If you pay for these taxes via an escrow account with your mortgage company, you will receive IRS Form 1098 each year to report the sum of these deductible taxes. If you pay your own property taxes, you will receive a receipt for your payment indicating the amount of your total tax. If you pay foreign property taxes, you may qualify for the deduction as well. The IRS allows a 100 percent deduction of property taxes from your gross income when you file your federal income taxes.
- Some states in the U.S. impose income taxes on their residents. If you reside in one of these states, the amount you pay in state income taxes is federally tax deductible. This includes tax withheld from your paycheck, as well as any estimated tax payments you make to a local government entity. If your state requires you to register your car each year, the money you pay to your local tax assessor or collector is also tax deductible on your federal income taxes.
- Wage earners who work for employers pay only half of their Social Security and Medicare taxes each year, as federal law requires employers to pay the other half. Unfortunately, self-employed individuals must pay all of their own Social Security and Medicare taxes. The IRS allows self-employed taxpayers to deduct the extra one-half of the taxes they pay on their annual income tax returns.
- If you purchase a car, truck or other motor vehicle, you may deduct the amount you pay in sales tax on the purchase from your federal income taxes. Additionally, if you live in a state that does not impose a state income tax, you may deduct the amount you pay in sales taxes each year to local and state governments. To claim the sales tax deduction, you must either save all of your receipts for the year to claim the actual amount you paid or you can claim the standard sales tax deduction instead.
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