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My home was just approved for a homestead/farmstead property tax relief. Since I file online via TurboTax, where and how do I account for this?

 
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2 Replies

My home was just approved for a homestead/farmstead property tax relief. Since I file online via TurboTax, where and how do I account for this?

If this lowered your property taxes for tax year 2024 there is nothing to enter on the 2023 tax return.  You would only enter the property taxes paid in 2024 on the 2024 tax return you file next year.

 

If this lowered your property taxes for 2023 and you took the Standard Deduction for 2023 there is nothing you need to report on the 2023 tax return.

rjs
Level 15
Level 15

My home was just approved for a homestead/farmstead property tax relief. Since I file online via TurboTax, where and how do I account for this?

You didn't explain the nature of the "property tax relief." It's a state or local program, and you didn't say what state or locality it is. Even if you identify it, there might or might not be anyone here who is familiar with that particular program.


Does the property tax relief reduce the amount of property tax that you will pay in 2024 or later years, or did they send you a refund of property tax that you paid in 2023 or earlier?


If it lowers your property tax for 2024 or later, see DoninGA's answer above.


If it lowers your 2023 property tax, did you (or will you) get a refund of some of the property tax that you paid in 2023 or earlier? If you got a refund, but you took the standard deduction for the year that the refund is for, it does not affect your income tax return. You don't enter anything about it in TurboTax.


If you got a refund of property tax that you paid in an earlier year, and you claimed an itemized deduction for property tax (real estate tax) in the earlier year, then the refund is what's called an "itemized deduction recovery." You might have to report part or all of the refund as taxable income in the year that you received it. But you report only the amount that actually reduced your tax in the earlier year. The calculation of the amount is complicated, and TurboTax will not do it for you. (It could be affected by other things besides the amount of property tax that you deducted.) You have to do the calculation yourself outside of TurboTax, and enter in TurboTax the taxable amount that you calculated.


If the amount is small, you might want to just report the full amount of the refund as taxable income to save yourself the trouble of doing the calculation. The IRS will not complain if you do that.


The rules for calculating the taxable amount that you have to report are in IRS Publication 525, pages 24 - 29, beginning with "Recoveries" on page 24. (Page numbers are for the 2023 edition.)


After you calculate the taxable amount that you have to report as income, you enter it in TurboTax. You should be able to get to the right place by entering "reimbursed deductions" (without the quotes) in the Search box, then clicking the link that says "Jump to reimbursed deductions."

 

In any case, you do not amend your tax return for any earlier year, whether or not you got a refund for that year or claimed itemized deductions for that year. You deal with any refund in the year that you received it.

 

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