Where do I deduct reassessed business property tax from a property sold in 2020, but paid in 2022?

Forum|Forum|3 years ago
January 25, 2023
6 replies
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I sold a rental property (land) in 2020 (with my brother). In 2022, we received a notice from the county that the value of the property was reassessed at the time of the sale, and the property tax increased by $22k, so we paid it. Is this expense deductible somewhere on my 2022 return without going back and amending the 2020 K1 return? fyi, the partnership which generated a K1 in 2020, was dissolved after the sale of the property. thanks for any help.

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DianeW777

Alumni - Intuit

It depends. You do not amend your prior year return because the tax was not paid until 2022. Therefore there is nothing to change in 2020.

Likewise the partnership has been dissolved and will not be paying the tax. You would not be allowed to use any portion of the bill that is for penalties, or anything other than the property tax itself such as local improvements.

Since your were the property owner at the time of the assessment and the taxes were paid late because the county or city delayed assessment, you should put the expense on your Schedule E since it is no longer in the partnership. Each partner would be liable for the payment of tax on the rental property owned in an earlier year. Since the property was business property and not personal use property, itemized deductions would not be allowed for this expense.

Schedule A Instructions for State and Local Real Estate Tax
IRS Publication 527 - Rental expenses are deducted in the year paid.

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SJH57Author

Level 4

Hi Diane,

thank you for the response - You mentioned that the property tax paid goes on a Schedule E on my return, but the link you graciously provided is for Schedule A?

RobertB4444

Alumni - Intuit

The reason @DianeW777 provided you with a link to the schedule A is to show you why you weren't able to deduct the property tax as an itemized deduction on that schedule.

The Schedule E is accessed through the Income section of TurboTax. Scroll down to the section for Investment income and go to rental real estate. You'll have to enter information about the property and then you'll be able to enter the taxes as an expense.

@SJH57

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