Can I deduct property tax paid from an escrow account?

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Casey Epton, CPA, is a Senior Tax Advisor at Deduction, where he helped design Taylor, CPAI from day one, building an AI tax agent that works seamlessly for both clients and the CPAs who verify every return.

Last updated:

Oct 2026

Yes, property taxes paid through a mortgage escrow account are deductible, but only for the tax year in which your mortgage servicer actually remits the funds to the taxing authority, not when you deposit funds into escrow.

How Escrow Accounts Work for Property Taxes

A portion of each monthly mortgage payment is deposited into an escrow account held by your servicer. Those funds accumulate and the servicer pays your property tax bill directly to the local taxing authority on your behalf. You are the economic payer of the tax even though the check is written by your servicer.

What Is Deductible

The amount of property tax actually paid to the taxing authority during the calendar year is deductible as an itemized deduction on Schedule A (Form 1040), Line 5b. Your mortgage servicer reports the amount paid on your behalf in Box 10 of Form 1098 (Mortgage Interest Statement). Amounts deposited to escrow but not yet remitted to the taxing authority as of December 31 are not deductible in that tax year.

The SALT Cap

Under the One Big Beautiful Bill Act, total state and local taxes (SALT), including property taxes plus state income or sales taxes, are capped at $40,000 for 2025 ($20,000 MFS) and $40,400 for 2026 ($20,200 MFS), regardless of actual amounts paid. The cap shrinks once modified AGI passes $500,000 for 2025 ($505,000 for 2026; half those amounts if MFS), but never below $10,000 ($5,000 MFS).

You Must Itemize

The property tax deduction is only available if you itemize on Schedule A. The 2025 standard deduction is $15,000 (single) / $30,000 (MFJ).

Escrow overages refunded to you are not taxable income. Shortfall payments become deductible in the tax year the servicer actually remits the tax payment to the taxing authority.

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