Property tax deduction eligibility when home placed in trust

Quick answer: Whether you can still deduct property taxes on Schedule A after putting your home in a trust depends heavily on what type of trust it is and how it's structured — the documents I have don't fully cover this, but they do give some relevant clues, mainly around one specific structure (grantor trusts).

What the documents say:

If the trust is set up as a grantor trust — meaning you, as the person who transferred the property to the trust, keep enough control or retained interest over it — then for tax purposes the IRS treats you as if you still owned the property directly. As Publication 17 and Publication 525 both explain: Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. (The grantor is the one who transferred property to the trust.)¹ A trust is generally treated this way if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property.²

If your trust qualifies as a grantor trust with respect to you, the general principle is that you're treated as the owner for federal income tax purposes — which is the basis many people rely on to continue deducting mortgage interest and property taxes personally after transferring a personal residence into a revocable living trust. However, none of the documents I have directly address property tax deductibility for a grantor-trust-owned home, so I can't confirm the mechanics or cite a specific rule on that point.

For a non-grantor trust (one where you've given up enough control that it's a separate taxpayer), the documents suggest a different result: generally, An estate or trust, unlike a partnership, may have to pay federal income tax. If you're a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. However, there is never a double tax.³ In that structure, the trust — not you personally — would typically be the one entitled to claim deductions like property tax, unless the trust distributes income/expenses through to you as a beneficiary in a way that flows onto your own return.

What it depends on:

• Whether the trust is revocable/grantor (you're treated as owner) vs. irrevocable/non-grantor (a separate taxpayer)
• The specific trust terms — who legally owns the property, who pays the tax bill, and whether you retain the powers that make it a grantor trust
• Also remember: the SALT deduction (which includes property tax) is capped — for 2025, the overall limit on the deduction for state and local income, sales, and property taxes has increased to $40,000 ($20,000 if married filing separately). The overall limit is reduced if your modified adjusted gross income is more than $500,000 ($250,000 if married filing separately) but will not be reduced below $10,000 ($5,000 if married filing separately)⁴ — this cap would apply regardless of the trust question.

Bottom line: This is a fact-specific trust and estate planning question that goes beyond what these IRS publication excerpts cover in detail. Given that trust structuring directly affects who can claim the deduction, it's worth talking to a CPA (or estate planning attorney) who can review your specific trust document before you rely on continuing this deduction.