Property Taxes deductible?

Financial Planning Tax Strategies
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Hi guys, My taxes have shrunk significantly since we sold our 3 rent houses and retired. This is the first year they are pretty simple. I am having the CPA do them, this one last time, and then next year, I think I can do them on my own. Just a couple quick questions:

–Are my property taxes deductible?
–How about Homeowner’s insurance?
–I think since we are not driving to any of our rent houses, there are no vehicle deductions, right?

We are just 2 retirees now, we get SS checks, have medical expenses, and have our stocks and some IRA’s. We paid all the capital gains on selling our rent houses last year. So, I think my taxes have gotten simpler. Whew! Finally! Thanks for your advice on the above items. I appreciate it.

-Footsox

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–Are my property taxes deductible?

Property taxes are deductible up to the combined SALT limit which is $10,000 for all deductible taxes (property taxes, state income taxes, some license fees such as VLF, etc…)

–How about Homeowner’s insurance? No
–I think since we are not driving to any of our rent houses, there are no vehicle deductions, right? Correct

Medical, Dental and Vision expenses over 7.5% of your income including mileage for medical, dental and vision appointments
Health insurance including Medicare
Charitable Donations

Without mortgage interest deduction it can be difficult to exceed the federal standard deduction. It may still be useful to itemize for state.

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–Are my property taxes deductible?
–How about Homeowner’s insurance?
–I think since we are not driving to any of our rent houses, there are no vehicle deductions, right?

As vkg noted, homeowner’s insurance is not deductible. Property taxes and sales or income tax up to a total of $10k; medical expenses over 7.5% of your AGI (including transportation expense); and charitable contributions are deductible.

I will note that these deductions are only deductible on Schedule A as itemized deductions. As alluded to in vkg’s post with the comment about not having mortgage interest making it more difficult to itemize, unless the total deductions exceed your standard deduction of $25,900 for MFJ (add an additional $1,400 if one of you is over 65 or $2,800 if both of you are over 65), you don’t get any benefit from itemizing deductions.

If your state allows you to bunch* your property tax deductions, that may help you to itemize every other year.

*As an example: In Texas, you need to pay your property taxes no later than Jan 31 every year, but the bill comes out in November. So, you could pay the bill due in 2022 on Jan 15, 2022, and the bill due in 2023 on Dec 15, 2022 - that way you would have paid 2 years of property taxes in 2022.

AJ

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Hi AJ, Thanks for your reply. You mentioned something that I hadn’t thought of. You mentioned transportation expense with regard to medical expenses. I had hip replacement surgery in August this year. I live in Florida, but decided to have a surgeon in Arizona do the surgery. So, maybe I can deduct transportation expenses? Not only did we have plane tickets, but a condo rental, a couple of hotel rooms, rental car, and meals. Are all of these things deductible under medical expenses, even if it was ME who chose to have the surgery in Arizona?

Thanks for your help. You are amazing in helping on this board. I am such a fan. :slight_smile:

-Footsox

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I had hip replacement surgery in August this year.

Hope you have recovered well. I presume you mean Aug, 2021?

So, maybe I can deduct transportation expenses? Not only did we have plane tickets, but a condo rental, a couple of hotel rooms, rental car, and meals. Are all of these things deductible under medical expenses, even if it was ME who chose to have the surgery in Arizona?

It depends. I would suggest that you look at IRS Pub 502 https://www.irs.gov/pub/irs-pdf/p502.pdf which lays out the rules for what can and can’t be deducted as medical expenses. For instance, here’s the information on “Trips”:

Trips

You can include in medical expenses amounts you pay for transportation to another city if the trip is primarily for, and essential to, receiving medical services. You may be able to include up to $50 for each night for each person. You can include lodging for a person traveling with the person receiving the medical care. For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Meals aren’t included. See Lodging, earlier.

You can’t include in medical expenses a trip or vacation taken merely for a change in environment, improvement of morale, or general improvement of health, even if the trip is made on the advice of a doctor. However, see Medical Conferences, earlier.

What I would say is that if you chose to get the surgery in AZ, when you could have used another equally competent surgeon closer to your home, the travel probably wasn’t ‘essential’ to your medical care, so it wouldn’t be deductible. That said, if there were specific medical reasons that this surgeon was the best one for your surgery (like he was the closest one using a specific technique that was recommended for your condition), you may be able to convince the IRS that the travel was an essential part of your medical care, and therefore, was deductible.

I would suggest that you discuss this with your CPA, since you’re still using him to prepare your 2021 taxes.

AJ

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Personally, I would take a more permissive position on your travel to AZ than aj485. If your time in AZ was essentially the same length as your required stay for pre- through post-op onsite medical care. I would say it is fully deductible (subject to the various limitations).

That said, I agree with her advice to consult your tax professional and follow his/her advice.

Ira

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Thanks Ira and AJ. I really appreciate so much advice you give to me.

As for the hip surgery, I had hip replacement surgery. Because this foreign object was going to be inside me for maybe over 20 years, I wanted to get it right. I did over a year of research on who was the best and which hip implant was the best. So, I could have had it done in Florida, with perhaps a lesser surgeon and perhaps a lesser hip implant, but I chose Arizona. As a side note, after the surgery and 1 week follow-up appointment, we drove to Sedona and spent a month, just relaxing (had not had a vacation in a couple years due to Covid…). I will not be trying to deduct any of the expenses in Sedona (of course).

Thanks for mentioning the standard deduction. Since I don’t normally do our taxes, I had forgotten about it. We will be very close. I haven’t done the final calculations, but it looks like we may be over or under by a couple thousand. Hope to figure it out in a day or two.

The crazy thing is, that I am finally primed and ambitious enough to tackle our taxes without our CPA (next year)… and now we are retirees, with not much in the way of deductions. Kind of ironic.

Thanks again!

-Footsox

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Property taxes on homes and cars are generally deductible. However, with simplified finances, you may be using the standard deduction, unless you have significant loan interest on your mortgage, or significant medical expenses not covered by an HSA/MSA.

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Property taxes on homes and cars are generally deductible.

Well, it depends on what you call ‘property taxes’ on cars - when someone says ‘property taxes on cars’, that often translates to ‘registration fees’ especially for those who live in a state that does not charge a fee known as a ‘property tax’ or an ‘ad valorem tax’ on cars (many states do not). And for those states that do, often, it may be that only a portion of the annual fee paid is deductible - it’s the portion that’s an annual fee that’s based on the value of your car. Any other fees are not deductible (title fees, road use fees, inspection fees, plate fees, etc.). And if your state bases annual car registration fees on something like the weight of the car, rather than the value of the car, then none of the fees are deductible.

The OP lives in Florida, and Florida registration fees are based on the weight of the car https://www.dmv.com/fl/florida/vehicle-registration?tg1=DVA&… So, none of the fees for cars registered in Florida are deductible on Schedule A.

AJ

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