Property taxes on primary residence double paid by seller/buyer.

[dnfleming]

Purchased primary residence Oct 2015.  Seller paid property taxes at closing.  My mortgage company erroneously paid the same tax bill again Dec 2015 out of escrow. Escrow was refunded Spring 2016.  Since the erroneous payment and subsequent refund occurred in two different calendar years it increased my 1098 for 2015 and reduced it for 2016.  My deductions are not large enough  to itemize for 2015 even with the mistaken tax payment.  And now I have to pay taxes on the property tax refund I received in 2016.  I'm facing double income taxation by being taxed again on after-tax money because the payment/refund occurred in 2 calendar years.  Do I have any recourse?

[DianeW · Accepted solution]

Yes.  If the property tax deduction was not utilized in 2015, then the refund you received in 2016 is not required to be taxed on your tax return because you received no "tax benefit".  Do not include the refund on your tax return for 2016.

Keep all the records in your file (2015 tax return and the income document you received for 2016, as well as the settlement documents) should you have a question about it later.