Do property taxes from closing on a home get entered as shown on my closing documentation? Does this include what was paid towards initial escrow?

[islandfootballer]

Purchased a home in December 2023, and my closing statement indicates I paid over $3700 worth of property taxes, including some into initial escrow payments. Is this all entered into my deductions even though none of this seems to appear on my 1098 from the lender?

[KrisD15]

I would check the closing statement again. 

If you closed in December, and property tax is paid AFTER the year, it would seem more likely that the SELLER paid YOU 3,700 for their share of tax (for tax from January through November)

Perhaps, since you closed in December, the 2023 taxes were paid through the Title company, but I would still look for a debit from the Seller and a credit to you for the Sellers share.

If you paid 3,700 for one month, that would mean your property tax is about 44,000 a year, and that seems excessive. 

If you can't figure it out, ask your real estate agent or the title company what you paid in 2023. 

[islandfootballer]

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.

[pk]

@islandfootballer , generally agreeing with my colleague @KrisD15  on the  property tax and the actions suggest,  my  understanding of the closing statement  ( and making assumptions about property tax  collection  in your county is two equal / unequal tranches -- chance of great error here though ) is that while the seller paid the first -- Summer taxes  prior to closing , the lender is holding in escrow  the property taxes  for the  Winter .  Thus it will not show on your 1098 from the lender because  it has not been paid -- will be paid  during 2024  (   in many counties it is in Feb or April ) and so your 2024  1098 will show the tax payments.

Most lenders  prefer to have a reasonable  balance in escrow  for tax payments  ,  even if  property  taxes are  paid through monthly contribution .

Does this make sense ?

[Opus 17]

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@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.

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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.  

[ThomasM125]

You can deduct property taxes to the extend they are paid and assessed in the current year. I would suggest you look at the property tax invoice for your property for the tax year you are filing for and divide it by twelve and then multiply that amount by the number of months you owned the property during the year. That will give you your share of the property taxes for the year. That would be the amount you can deduct on that year's tax return, assuming you paid it during the year. You may have to adjust your calculations to account for an assessment period that does not run from January to December.

Prepaid property taxes are only deductible if they are assessed during the current year. You can probably look up the assessed taxes for your house online by going to the tax assessors website for your county.