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Level 3
posted Feb 24, 2025 12:32:09 PM

Property Tax deduction on Schedule E

I paid property taxes in fall 2023 that were for the levy period of july 2023 - June 2024.  I converted the property from a second home to a short term rental (schedule E property) on January 1, 2024.  Can I take a prorated deduction on Schedule E for the fact that seven months of this payment were for 2024.   Do I have to continue to prorate these amounts each year or can I take the full amount off in the year paid from now on since I'm using cash-basis accounting.

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1 Replies
Employee Tax Expert
Feb 24, 2025 12:40:50 PM

You can prorate the cost of tax paid in 2023 to deduct a portion of it in 2024. You can deduct the amount paid in the year paid going forward since you are on a cash basis. If you had deducted the property tax in 2023 as an itemized deduction, you will need to amend that return to reduce the deduction if it reduced your tax in 2023.