Sale of home and property taxes

[eagle32nd]

The sale of our home was finalized in December of 2020.  In addition to the property taxes we paid in 2020, we also paid the property taxes current (an additional $4700).  Are we able to deduct those additional property taxes paid as part of the sale?

[HelenC12]

Yes, you're able to deduct the additional property taxes of $4,700, that was credited to the buyer at closing, in 2020.

Additional information: Can I claim property (real estate) taxes if I recently bought or sold my home?

[eagle32nd]

Thanks so much for the quick response!!  It's much appreciated.

[HelenC12]

You're very welcome. Thank you for using TurboTax. We really appreciate it!

[Opus 17]

I'm not sure the answer is correct on the information given.

You can deduct property taxes you paid that cover your period of ownership.  In most states, property taxes are paid in advance, such as in January for the upcoming year.  In that case, the seller would give you a credit at closing for the last few days of 2020 that you pre-paid but which they will own the home, and you have to reduce your deduction by the amount of the credit (the taxes that are attributed to the time you did not own the home.)

In a couple of states, taxes are paid in arrears.  You would pay in January 2021 for the 2020 tax bill.  In that case, when you sell at the end of 2020, you give the buyer extra money to cover the January tax bill that represented your ownership period.  Those taxes are indeed deductible by you in 2020 even though you paid them to the buyer instead of the city or county.

It's not clear to me that is reason you paid the extra.  Assuming it is, the expert's answer is correct.  But if there was some other reason you paid a property tax settlement to the buyer, we would need to know more. 

[eagle32nd]

Thanks for responding.

We live in Iowa, and we pay our property taxes in arrears.  When the home is sold, the seller pays the taxes up to "current" as part of the sale.  The new homeowner then gets essentially a year without paying property taxes, then they begin paying in arrears.

Hopefully that de-muddles it a bit.

Thanks again!