Property Tax Deduction Credit
January 22nd, 2010Question: Can I deduct property tax that I paid but that I was given a credit for at closing?
I recently purchased a condo in Chicago, where property taxes are paid one year in arrears. I was given a credit at closing for the 2006 taxes. These taxes came due in 2007 after the closing and I paid the tax bills in 2007. Can I deduct these property taxes on my 2007 income tax and just include the credit as part of figuring the purchase price of the property? Or do I have to wait until I’m paying property taxes for which I have not been credited before taking the deduction?
Answer: The taxes were prorated between you and the seller since the sale took place in the middle of the property tax year.
IRS publication 530 states
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.
Consequently, no deduction because you didn’t pay them, the seller did. When you pay the property tax, you only pay the part after the purchase–you subtract the credit.
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