I just purchased a duplex in August 2012. My property taxes are paid through escrow. I just got my 1098 from the bank and it shows that no property taxes were paid (they had already been paid for the tax year, prior to closing). Can I still claim the amount I paid to the bank for escrow as a property tax expense? Thanks!
The escrow account isn’t actually an expense that can be deducted, it’s more like a bank account that expenses are paid from but is controlled by the mortgage company. When the mortgage company pays expenses from the account, those expenses can be deducted.
Although you note that the taxes were paid for the year prior to closing, check your HUD form from the closing. I expect you will find that you reimbursed the previous owner for those taxes at closing and that reimbursement of the taxes from you to the previous owner is deductible.
I think you’ve got it backward.
Property taxes are not paid in advance. It’s more likely that the previous owner paid YOU for the property taxes from Jan to August 2012, which will be remitted in Jan 2013.
This will be a 2013 tax deduction for you. Further, you can only deduct the amount paid to the taxing jurisdiction minus what the previous owner paid you (actual cash that you’re out). Escrow is irrelevant; that’s your money until the taxes are paid.
I suppose it’s possible that you live in a state where taxes are handled some other way, but I’ve never seen it. But I see new stuff all the time.
In this area property taxes are due in Feb for Jan-March, May for April-June, Aug for July-Sept and Nov for Oct-Dec. Depending on where your closing date falls during the quarter and when the seller paid taxes for that quarter it is normal for the buyer to reimburse the seller for the taxes the seller paid for between closing and the end of the quarter. Any taxes prepaid by the seller would be reimbursed at closing by the buyer. Evidently property tax payment schedules vary state to state. I learn something new every day.
The HUD form should detail exactly who paid what to whom.
good to know jmd. Where are you located?
South New Jersey
Thank you! I learned something today. I assumed that most states have similar property tax payment schedules. Does anyone know where Bothell Washington belongs to?