If I prepay my 2018 property taxes directly to the taxing authority in December 2017 and deduct on my 2017 tax return, what happens if I sell my property in mid-2018?

[DoninGA]

Normally at closing you would receive a credit for property taxes paid for the remaining months of the year where the buyer is the owner.

[rsigdahl]

Would I have to restate my 2017 tax return where I took the deduction for the prepayment?

[DoninGA]

Property taxes are an itemized deduction reported on Schedule A.  
Are your 2017 itemized deductions on Schedule A  greater than the standard deduction for your filing status?  If so, then you would have to file an amended 2017 tax return and on the 2017 Schedule A you would need to enter the correct amount of taxes paid.

[rsigdahl]

Yes, I itemize and use sch A. Okay, thanks!

[rjs · Accepted solution]

If you receive, at the closing in 2018, a credit or reimbursement for part of the property tax that you deducted on your 2017 tax return, you would not amend your 2017 tax return. The credit or reimbursement is an itemized deduction recovery. You report it as income on your 2018 tax return, to the extent that it reduced your 2017 tax. See the section on "Recoveries" in IRS Publication 525. You can read that section online at the first link below, or download a PDF of Publication 525 from the second link below. The section on Recoveries begins on page 22.

Read online: https://www.irs.gov/publications/p525#en_US_2016_publink1000229391

Download PDF: https://www.irs.gov/pub/irs-pdf/p525.pdf

[DoninGA]

Thanks rjs...Learned something new.