@islandfootballer wrote:
Hello KrisD15,
Thanks for the reply! I checked my Closing Disclosure again and it had 12 months of prepaid property taxes at roughly $3300, with another ~$500 towards 2 months of proprty taxes for escrow payments on the side of the borrow/purchaser. It didn't show anything for property taxes for the borrower.
I have reached out to the loan manager from the organization that provided the loan for the mortgage at closing to see if they can give more clarification.
Let's clarify. Money paid into escrow is still your money, it only counts as property taxes paid when the county is actually paid. So escrow by itself is never deductible.
However, there are adjustments that need to be made at closing. A person can only deduct taxes they paid for the time they owned the house. Suppose your taxes are due on Feb 15, to cover the whole year. The seller paid tax on 2/15/23 for all of 2023. Suppose you closed on December 28. You paid the seller a credit for 3 days of taxes, that they prepaid but which cover the days you owned the home. They have to reduce their tax deduction by that credit, and you can claim those taxes as if you paid them to the county, and even if they are not on any 1098. (3 days is not much, but that's how it works. If you had closed on June 28, you would have given the seller a credit for 6 months of taxes, that you could deduct.)
In New York, county taxes are due in February for the year January to December, and school taxes are due in September for the period of September to next August, so there are separate credits and the adjustments are figured separately.
In some states, taxes are paid in arrears. You might get a tax bill in January 2024 that pays for all of 2023. In that case, you can only deduct the last 3 days of taxes, because you can only deduct taxes for the time you owned the home. But in this situation, the seller would have given you a credit at closing to cover the taxes that you would be paying for the days that they owned the home before the sale.
