Property tax is one of the largest costs for homeowners in Massachusetts. The good news is that your federal tax return can write off property taxes. However, there are a few variables, such as your salary and the value of your home, that affect the amount you can deduct.
You are permitted by the federal government to deduct up to $10,000 in real estate taxes from your taxable income. Therefore, if your property taxes were $12,000 last year, you can only deduct $10,000 from your income. But if you’re married and filing jointly, you and your partner can each deduct up to $10,000 in property taxes, for a combined deduction of $20,000.
The property tax deduction is an itemized deduction, thus you must itemize your deductions rather than claiming the standard deduction. This is crucial to understand. It might not be worthwhile to itemize your deductions if they are less than the standard deduction.
You might be asking if a rent reduction is taxable income if you rent in Massachusetts. It is regarded as taxable income, hence the answer is yes. Therefore, if your landlord lowers your rent by $1,000, you must include $1,000 as income on your tax return.
However, the portion of your rent that your landlord forgoes if you are unable to pay it all may not be subject to taxation. This is so because the forgiven amount qualifies as a gift, and gifts are frequently exempt from taxes.
In conclusion, Massachusetts allows for the deduction of property taxes, although the exact amount depends on your income and the value of your home. Rent reductions are regarded as taxable income, whereas rent forgiveness could not be. A tax expert should always be consulted to ensure that you are properly reporting your income and deductions.