Real Estate Taxes

Real estate taxes are deductible in the year they are paid to the county tax office. If taxes are paid into an escrow account, they are deductible when actually paid to the taxing authority, not when they are paid to the escrow account or agent. If you pay late and incur penalties and interest, those are not deductible; only the tax portion.

What if you paid someone else's real estate tax? For example, you pay your parents' property tax bill or when you sell your

home, you offer as part of the negotiation to pay the buyer's portion of the remainder of the year's tax bill, even though you won't own the property after closing? In general, property taxes can be deducted only by the owner of the property, regardless of who pays it, so you might want to negotiate a different item in the sale because you'll pay the tax but not be able to deduct it. Your buyer will deduct those taxes on their tax return. On the other hand, this may be a benefit to the buyer if they itemize their deductions on the tax return and you don't. You may want to ask, as it could potentially be a great negotiating item.

What if you own more than one property? It doesn't matter if you own 1 home or own 10 homes, property taxes are deductible for all the properties you own.

 

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