Under federal tax law, tax filers who own a home and pay property tax on it to a local government entity can use that same dollar amount as a legal tax deduction on a federal income tax return. The federal tax code allows a reduction to a person's taxable income by the property tax amount paid since it is simply going to another level of U.S. government and is not used for personal consumption or use. The deduction reduces a person's overall income level so that the net figure ends up potentially placing the tax filer in a lower tax bracket. That in turn can lower his taxes owed on taxable income earned for the year. While the deduction is not a dollar for dollar reduction in taxes, like a tax credit, it still helps reduce income taxes owed in the same tax year.