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Lucysql
New Member

Sold house - property tax deduction?

Sold my house in January 2015. Property taxes of $7000 due in January 2015 (related to 2014) had not been paid at time of sale. Instead, the seller's proceeds were reduced by the $7000 property tax bill.

As the seller, can I still deduct the 7K of property taxes on my 2015 1040?
7 Replies
ChelsiE2
New Member

Sold house - property tax deduction?

[edited: Apr 13, 2016, 12pm]

Yes.  In the specific case mentioned above, If you paid property taxes (related to the prior year) through the closing associated with the sale of your house (either directly or as a reduction to the amount you received), this amount will be deductible as Real Estate Taxes on your Schedule A.  

From IRS Publication 530:

Real estate taxes paid at settlement or clos­ing: 

  • Real estate taxes are generally divided so that you and the seller each pay taxes for the part of the property tax year you owned the home. Your share of these taxes is fully deduc­tible if you itemize your deductions.

Division of real estate taxes:

  • For federal income tax purposes, the seller is treated as paying the property taxes up to, but not includ­ing, the date of sale. You (the buyer) are treated as paying the taxes beginning with the date of sale. This applies regardless of the lien dates under local law. Generally, this information is in­cluded on the settlement statement you get at closing.
  • You and the seller each are considered to have paid your own share of the taxes, even if one or the other paid the entire amount. You each can deduct your own share, if you itemize deductions, for the year the property is sold. 
JJFHydraulic
Returning Member

Sold house - property tax deduction?

I purchased a house the seller gave a concession on the price calling it for "real estate taxes": Looking at IRS publication 520: "The buyer is treated as paying real estate taxes beginning with the date of sale.. "You and the seller are considered to have paid your own share of the taxes, even if one or the other paid the entire amount".  So: Does that not mean that I (the buyer) can deduct all real estate taxes applied to the home that cover it on and after the selling date- in spite of the concession? Is not the concession merely a price reduction?
JJFHydraulic
Returning Member

Sold house - property tax deduction?

I purchased a house the seller gave a concession on the price calling it for "real estate taxes": Looking at IRS publication 520: "The buyer is treated as paying real estate taxes beginning with the date of sale.. "You and the seller are considered to have paid your own share of the taxes, even if one or the other paid the entire amount".  So: Does that not mean that I (the buyer) can deduct all real estate taxes applied to the home that cover it on and after the selling date- in spite of the concession? Is not the concession merely a price reduction?
ChelsiE2
New Member

Sold house - property tax deduction?

@JJFHydraulic Let me make sure that I understand your question.  Let's say you purchased a home on July 1, 2015.  At that time none of the property taxes related to 2015 had been paid.  Let's say the total assessment for Jan 1 - Dec 31, 2015 was $1,000.  Let's also say that the seller paid this $1,000 at closing.  Therefore, you would be able to deduct $500 of this amount as property taxes on your Schedule A.  This holds true because the $500 is basically the prepaid amount of property taxes that were included with the purchase of the house.  Is this what you're asking?

Please note: the question above is asked by a seller who sold property in 2015 with property taxes due from 2014.
JJFHydraulic
Returning Member

Sold house - property tax deduction?

Yes, and actually the home was purchased on Jan 8th. The taxes which run Jan 1 through Dec 31 were about $3000. The seller gave a concession of let's say $4000 on the sale and attributed it to the $3000 in taxes and the $1000 in bank origination fee. But in reality he only owned the home for 8 days, so I should be able to claim the rest of they year's county taxes of  ($2934). And I also should be able to claim the $1000 bank origination fee(points).  Do I have it right?  Too often I see on this site that the seller get's to claim those taxes but I don't think so. Plus it pertains to the taxes I am working on now.
ChelsiE2
New Member

Sold house - property tax deduction?

@JJFHydraulic I edited my answer above to include Pub 530.  Yes, you are correct that you would be able to deduct the portion of the real-estate taxes that were paid by the seller which related for the period of time you (the buyer) owned the home.

For your second question, the IRS allows buyers to deduct mortgage points even if the sellers paid them.
JJFHydraulic
Returning Member

Sold house - property tax deduction?

Thank you, I do appreciate your assistance. Very helpful.
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