We bought and sold a house this year. Because our taxes are paid a year in arrears, when we sold our house, we had to pay to the buyer taxes from July 2020 thru the sale date. And conversely, when we purchased our new house the sellers did the same. Are the taxes we paid at closing for the prior year time period deductible this year? And would we deduct the credit we received at closing on the new house from the total interest paid? In addition, we escrow our mortgage payments. Are the payments made to the escrow account this year (for both homes) the amount we can deduct as mortgage interest or only the amount related to the actual payment to the county in the current year?
when you sold the house because the taxes are a year in arrears you were charged an amount for the unpaid taxes that will be paid by the buyers. it was your liability so you get a deduction.
when you bought the house, again because taxes were in arrears, you will be the ones actually paying the tax bill so you got a credit on the closing statement. the credit is to offset the taxes you will pay for the period you did not own the property. so in the year you pay those taxes, reduce your tax deduction by the credit.
part of the credit could be for 2020 taxes due in 2021 but payable after the date you closed
part or all of the credit would be for the 2021 taxes payable in 2022
so if 2020 taxes were taken out of your escrow account in 2021 offset them by the credit for that period. any excess paid is deductible
in 2022 you will offset the taxes paid for 2021 by the credit you received for that year.
amounts deposited into escrow are not deductible. it is only when they are taken out to pay the tax bill that you are entitled to a deduction
I've never heard of the entire mortgage payment being escrowed only the parts taken out of the monthly payments for taxes and insurance,
Real estate taxes are generally divided so that you and the seller each pay taxes for the part of the property tax year you owned the home. Your share of these taxes is fully deductible if you itemize your deductions.
For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. The buyer is treated as paying the taxes beginning with the date of sale.
when you sold the house because the taxes are a year in arrears you were charged an amount for the unpaid taxes that will be paid by the buyers. it was your liability so you get a deduction.
when you bought the house, again because taxes were in arrears, you will be the ones actually paying the tax bill so you got a credit on the closing statement. the credit is to offset the taxes you will pay for the period you did not own the property. so in the year you pay those taxes, reduce your tax deduction by the credit.
part of the credit could be for 2020 taxes due in 2021 but payable after the date you closed
part or all of the credit would be for the 2021 taxes payable in 2022
so if 2020 taxes were taken out of your escrow account in 2021 offset them by the credit for that period. any excess paid is deductible
in 2022 you will offset the taxes paid for 2021 by the credit you received for that year.
amounts deposited into escrow are not deductible. it is only when they are taken out to pay the tax bill that you are entitled to a deduction
I've never heard of the entire mortgage payment being escrowed only the parts taken out of the monthly payments for taxes and insurance,