Real estate tax with different fiscal years
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uid215233
Returning Member

Real estate tax with different fiscal years

I moved between two municipalities that have different real estate tax payment schedules and fiscal years, and I ended up not paying any real estate tax out of pocket in 2020. In location 1, the fiscal year was July 1-June 30. I sold a house in mid-June that I had paid taxes on through June 2020 (taxes were paid in 2019 and deducted from my 2019 taxes). The buyer paid me about $200 for the taxes for the tail end of the fiscal year at closing.

 

In location 2, I bought a house in mid-June, but the fiscal year is the calendar year in this new location, and the taxes aren't due until the following spring (e.g., April 2021 for the 2020 tax year). The seller paid me about $1000 for the 2020 taxes due on the new house that I will pay in 2021.

 

I somehow ended up not paying any real estate tax this year (lucky me, I know!), but I'm not sure how to handle the amount both the buyer and the seller paid me for these taxes on my 2020 tax forms. It seems that I can treat the $200 from my buyer as miscellaneous income (since I had previously deducted the entire amount, and now should deduct $200 less), but the amount the seller paid me at closing for the 2020 taxes that I haven't paid yet is a mystery. IRS publication 530 has language that makes it seem that I should deduct my "half" of the real estate tax for the new house in 2020, regardless of who paid whom what at closing. However, I'll then actually pay the whole thing in 2021 and would want to deduct that then. I do everything on a cash basis and don't want any messy carry-overs if I can avoid it.

 

Any ideas? I'm confused.

2 Replies
Mike9241
Level 6

Real estate tax with different fiscal years

you are correct the $200 is misc taxable income if you deducted all of your real estate taxes paid in 2019. (ie you weren't limited by the $10K cap on taxes.

 

 

the $1,000 credit for the 2020 taxes that the seller gave you will offset the taxes you pay in 2021 for 2020

 

uid215233
Returning Member

Real estate tax with different fiscal years

But what do I do this tax year (2020) about the $1000 the seller paid me? Is that miscellaneous income as well? Does it reduce the cost basis of my new house? It's income of some sort, right?

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