Can I claim property (real estate) taxes if I rece...

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Can I claim property (real estate) taxes if I recently bought or sold my home?

Yes, your share of these taxes can be claimed if you itemize your deductions. Property (real estate) taxes are generally divided between the buyer and seller so each pays taxes for the part of the year they own the home. See Buyers and Sellers below for details.

  • Property (real estate) taxes are part of a combination of taxes whose total is taken as a single deduction. The maximum deduction you can take for the combination of 1 and 2 below is $10,000 (or $5,000 if married filing separately).
    1. State and local income tax, OR sales tax.
    2. Property taxes (real estate taxes + personal property taxes)

Buyers

You can claim any property (real estate) tax you were charged in your closing costs. Look for a "real estate tax", "property tax" or “county taxes” charge on your HUD-1 settlement statement.

If you made payments into an escrow account, you can only deduct the amount actually paid by your lender to the taxing authority on your behalf during the year.

Be sure to claim the deduction in the year you (or your lender, on your behalf) made the payment. So if you paid your 2020 property tax on December 14, 2019, claim it on your 2019 return.

Sellers

You can claim property (real estate) tax you already paid for the calendar year, minus any amount allocated to the buyer. It doesn’t matter if you were reimbursed for the buyer’s share at the close of escrow or not—you can only claim your share of the property (real estate) tax for the time you owned the home.

Here are two ways to see what you were reimbursed:

  • It's in Box 5 of Form 1099-S
  • Look for "property tax", "real estate tax" or “county taxes” your HUD-1 settlement statement

 

Marlene sold her home to John, and it closed on November 15, 2019. The property tax bill is $6,000 per property tax year, which runs July 1, 2019 – June 30, 2020. Marlene made the first payment of $3,000 to cover the July 1 – December 31, 2019. The monthly property tax amount is $500 ($3,000 divided by 6 months).

John claims $750 on his taxes for half of November and all of December. He reimbursed Marlene $750 through his closing costs and sees a pro-rated reimbursement of $750 on the HUD-1 statement.

Marlene claims $2,250 on her taxes—her payment of $3,000 less John’s share of $750. She sees this amount in Box 5 of Form 1099-S as well as on the HUD-1 statement.

As mentioned above, the property (real estate) tax is part of a combined deduction: Sales tax OR State and local property taxes; combined with property taxes (real estate taxes + personal property taxes).

This deduction is capped at $10,000 ($5,000 if married filing separately), where previously there was no cap. Taxpayers must itemize to get this deduction — that part hasn't changed.

This hypothetical example illustrates the differences:

2018 and after

2017

  • State and local tax (or sales tax) = $7,500
  • Property tax = $5,000
  • Vehicle registration = $500
  • Total SALT = $13,000

Deductible amount = $5,000 (married filing separately) or $10,000 (all others)

  • State and local tax (or sales tax) = $7,500
  • Property tax = $5,000
  • Vehicle registration = $500
  • Total SALT = $13,000

Deductible amount = $6,500 (married filing separately) or $13,000 (all others)

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