Property Tax Deductions in year of home sale

[J Frank Parnell]

I recently had to sell my father's home, and I am now doing his taxes.  In the income section during reporting the sale of the home and the costs associated there is a section for reporting the property taxes prorated for the portion of the property taxes he paid last year.  Then I get to the section on deductions and Turbotax is asking whether he paid property tax last year.  Do I skip this section, or enter the amount he paid for taxes again in this section?

[Vanessa A]

No, you would not enter it the second time. When you are in the deductions and credits section, this is for itemized deductions.  If you did, you would basically be double dipping and getting a deduction for the same payment twice. So yes, you would skip that section.

[J Frank Parnell]

Okay I understand the double dipping, but wouldn't it make more sense to claim it on the standard deductions for the year, where it is still counting as an actual deduction?  I have up to a $250,000 exemption for costs toward the sale of the home, and I am still $50,000 shy of that amount, so by including the $3500 in property tax on that line, doesn't allow any deduction at all, but including it in property taxes paid would give me the deduction on $3500.

[KrisD15]

I ran through the program and there is an area for entering selling expenses, but property taxes are not considered a selling expense. The portion of taxes paid would be carried over to Schedule A. The portion of property taxes when owned does not affect the sale. 

The deduction would only be relevant if the taxpayer can itemize. 

If the taxpayer uses the Standard Deduction, the property tax paid will make no different on the return.

If the tax is paid after closing, the credit the buyers gets is the amount the seller can claim. In other words, if property tax is 1,200 a year and your close at the end of April, no tax has actually been paid, but the Buyer would get a 400 credit and the Seller would claim 400 property tax paid. The buyer would claim the remaining 800 (or whatever the final property tax amount less 400 turns out to be).

[J Frank Parnell]

On the settlement statement for the home, the prorated taxes is shown as part of the closing costs.  Sale of the home was $590,000, and the taxes from when my father lived in the home from January through September is shown as a debit to the sale price along with Real Estate commission fees, recording costs, Title costs, and costs to fix items in the house.  This is why I need to know if they need to be included here, or should they be included as a property tax deduction, or both.

[PatriciaV]

When you enter the property taxes under the Sale of Your Home topic, TurboTax carries the amount over to Deductions for Schedule A. Allowable selling expenses will reduce the gain on the sale (if any).

Sales expenses include:

• commissions
• appraisal fees
• broker's fees
• legal fees
• advertising fees
• home inspection reports
• title insurance
• transfer taxes or fees
• geological surveys
• loan charges (points) or other fees paid on the buyer's behalf

Sales expenses do not include:

• mortgage payoffs
• home equity loan payoffs
• rent-back costs
• payoff to creditors
• property taxes
• homeowner association fees

@mdamson