Escrow Shortages

[Trevor1216]

Hello! I am a new homeowner and this year is the first year that we are renting our property in Columbia SC. 

Are most recent Escrow analysis has a significant increase and our balance now has a shortage of over $5,000

As a result, we are now paying over $800 more per month for our mortgage. 
Is there anyway this can written off when filing our taxes? 
Thank  you!

[Vanessa A]

You are renting out your property in SC? Your property is a multi unit that you live in and rent out?

If you purchased the property in 2022 and are renting it out to tenants and receiving rental income, then the property taxes that are due and paid (when paid to the taxing authority, not when collected in escrow) are deductible as rental expenses.  The same applies to if you are living in the home.  You can only claim it when the taxes are actually paid to the government, not when the bank is holding it in an account for you. 

If you purchased the property in 2022 and this is where you live, and you are not renting it out, in order to claim any deduction for property taxes you would need to itemize your return.  In order to benefit from the property taxes, you would need to have total itemized expenses greater than your standard deduction.  

Itemized deductions for 2022 include Mortgage Interest, State and Local taxes up to $10,000 including property taxes, medical expenses in excess of 7.5% of your AGI and charitable contributions.  If these do not add up to more than your standard deduction, you will not see any type of benefit for your mortgage interest.  

[Mike9241]

your deposits into the escrow account are not deductible. the IRS considers the escrow agent to be the same tax person as yourself.  you get the tax deductions when money is taken out of escrow to pay taxes and insurance.

[Trevor1216]

I own the property but do not live there as I am on active duty orders to a new assignment.
I am renting my house out.

I am mainly curious if there is a way to write off any losses as a result of a spike in my mortgage while still charging the same rent. 

[Critter-3]

These are NOT losses to be written off ... you only get to deduct the expense when it is actually paid out not when you pay it into the escrow account.   What you do have is a "negative cash flow" situation and on the Sch E you will enter the rent you acutually got and the expenses you actually paid.  The full mortgage payment including the increase for the escrow are not deductible on the Sch E as such  ... instead you can deduct the actual insurance & taxes paid along with the mortgage interst.  The cost of the home must be depreciated as the IRS requires.   

So even though you show a monthly "loss" on the books it will not look the same on the tax return. The Sch E may show a loss if the rent taken in is less than the total of all the allowed expenses ... please review the Sch E carefully to see how this is calculated. 

The IRS pub 527 has all the rules :  https://www.irs.gov/pub/irs-pdf/p527.pdf