My wife and I reside year-round in CA. We own a house that she inherited from her father in NH and pays property tax on it (it is not a rental property). Can the property tax we pay on the NH house be deducted on the federal and/or CA returns? Would there be any point in completing a NH tax return to claim it there, given that we have no income from NH?
See the instructions for Line 6 of Form 1040 Schedule A. You can deduct there all state, local, and foreign taxes paid which are based on the value of any real property you own that isn't used for business. Doesn't matter if it's your first, second, or one hundredth property, occupied or vacant (but a rental would be considered "used for business" and such taxes would be deducted against the rental activity, not on Schedule A).
-Mark Bole
Yes on Federal. We have homes in two states and deduct both. I have no knowledge regarding CA rules.
NH has no taxes for which this would be applicable to you (i.e. no income tax).
However, if you should happen to convert it to a rental property, AND ALSO realize $50,000 or more in gross rentals from this property, then (under current rules) you would have to file a NH Business Profits tax. In that case, the property taxes paid would be deductible on your NH BPT return.
If it is a rental property, and your gross rents are less than $50,000, then you have no worries.
--ron
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