Deducting Real Estate Taxes on Home Purchase

[Mattman]

Hello,

In tax year 2020, I sold my primary residence and then purchased a new primary residence in October 2020. I escrow my mortgage payments on my new primary residence. No distributions in 2020 occurred from my escrow account (probably b/c I bought it so late in the year). 

The Closing Disclosure (on  my new primary residence) shows I reimbursed at closing the seller for real estate taxes they previously paid. I reimbursed them a prorated amount from 10/21/2020 (my purchase date) onward. These prorates taxes were NOT paid from my escrow account, since they were due at closing on my new primary residence.

Do I COMBINE those pro-rated tax amounts paid at closing on my new primary residence with the real estate taxes I also paid on my prior primary residence (that I also sold in 2020)? Or must I separate the taxes paid on each of these primary residences? If so how? I don't see another field.

Note: I realize you can only have one primary residence at a time. I sold my prior primary residence, then bought my new primary residence, all in 2020.

[Mattman]

When I say reimbursed, on my Closing Disclosure, it shows there were "Adjustments" at closing whereby I reimbursed the prior owners for the taxes they already paid but for which would no longer be living in my new primary residence b/c they sold it to me.

[Carl]

I escrow my mortgage payments on my new primary residence

To clarify, mortgage payments are not escrowed. Things like property taxes and insurance are escrowed, and what gets deposited to that escrow account is included in your mortgage payment each month.

I reimbursed at closing the seller for real estate taxes they previously paid

What you reimbursed the seller, was for the property taxes they previously paid, that cover the period of time starting from the date you purchased and closed on the sale.

These prorates taxes were NOT paid from my escrow account,

They never are paid from escrow at the closing. At least, its not shown that way on the paperwork.

do I COMBINE those pro-rated tax amounts paid at closing on my new primary residence with the real estate taxes I also paid on my prior primary residence (that I also sold in 2020)?

Yes, you can do it that way. You "should" receive a 1098 on the home you sold that will show the property taxes paid by you. Subtract from that amount, the amount you were reimbursed by the buyer of your old home.

On the home you purchased, the closing documents will show somewhere the property taxes you reimbursed to the seller. Those can be included in the total property taxes as figured in the previous paragraph.

If you didn't make an actual mortgage payment in 2020, then you probably won't receive a 1098 on the new home. Therefore, all your property taxes and mortgage interest you can claim are on the closing statements.  If par chance you "do" receive a 1098 on the new home, then more than likely it's duplicating or including what's already reported on the closing statements. So be careful that you don't unwittingly "double-dip" on your deductible mortgage interest and property taxes.

[Mattman]

Thanks Carl. To clarify, I did not escrow on my prior residence (though I did receive a 1098 showing interest I paid). Nonetheless, I believe I'm on the same wave length as you regarding the tax concepts at play.

#1. On my old house, I take taxes I paid (not from an escrow b/c I did not have an escrow account for that property), minus any amounts my buyer reimbursed me at closing, and get a net tax deduction amount I may claim for that property.

#2. Next, I take the amount of taxes I paid on the purchase of my new property by virtue of the amount of "adjustments to seller" (or reimbursements as I called them) paid by me to the seller at closing and claim that deduction amount. 

I add the tax deduction amount in #1 and #2, and that is the amount of tax I may claim as a deduction. Does that sound right? That's how I figured it on my TT.

When TT asks you to plug in these numbers, from #1 and #2 above, I consolidated those figures and placed that consolidated figure in the Primary Residence field. The only other fields on that screen were for secondary homes and vacation home. Both of these homes were/are my primary residence, so that's why I consolidated the figures into that one box (but for some reason that bothers me.).

[Carl]

You're on track just fine. Basically, while the program allows for multiple interest payments/1098's, it only has a single screen for the property taxes. Now on that screen there is a box for "other taxes paid". You could split the two that way. But I see no sense in it, as in the end only the total gets entered on SCH A line 5b.