The taxes you pay on real estate can benefit you on your income tax return if you itemize your deductions on Schedule A of Form 1040. You may claim the property taxes you pay and the mortgage interest.

Real estate taxes can be included as a deduction. Permitted deductions in all categories must be greater than your permitted standard deduction before they reduce your tax liability. For example, a single person under age is allowed a standard deduction of $5450. If that person owns a home that is mortgaged and has medical expenses, interest, real estate taxes, state taxes etc, and his total deductions are $7500, that reduces his taxable income by $2050.

Exception for people over 65 – seniors paying real estate taxes get a $500 addition to their standard deduction if they are unable to itemize deductions.

The standard deduction is upped by $1000 for joint filers (500 for single) who paid up to $2500 in real estate or property taxes. If you paid over that amount, you can still claim it as a line item itemized deduction. Topic 503 – Deductible Taxes, IRS website and

To answer your other question, many states collect property taxes based on the assessed value of real estate.