Real Estate Tax

[Questionguy101]

When you calculate the real estate tax to be claimed on Schedule A for itemized deduction, do you just add up the total that your client paid to the county assessor's office during the tax year?

[JSLATER]

"Deductible real estate taxes are generally any state, local, or foreign taxes on real property. They must be charged uniformly against all property in the jurisdiction and must be based on the assessed value. Many states and counties also impose local benefit taxes for improvements to property, such as assessments for streets, sidewalks, and sewer lines. These taxes cannot be deducted. However, you can increase the cost basis of your property by the amount of the assessment. Refer to Publication 551,"

The amount you can deduct, is the actual amount of property tax less assessments paid in the tax year.

[S T]

Property Tax

Depending on the State you are in, yes I only add up what is actually paid, NOT the bill.
California for example issues a bill in October of the calendar year, and there are two payments, one usually Feb-April, and another installment due Nov-December.

North Carolina we just received and most all payments are due from Sept -December for the Calendar year and maybe by January of the following year.

Most Taxpayers on form 1040 are "Cash Basis" so normally it would go by what is paid in the tax year.

Hope this helps,

Sandy

[OtisMozzetti]

based on assessed value.

must be based on the assessed value.

When I do my tax return, as an Enrolled Agent, I claim the "ad valorem" tax which is a percentage of the assessed value. I do not claim the "Fixed charges and Special Assessments", about $320, which consist of "Union Sewer Service", various fixed-amount parcel taxes, and so on. The "Fixed charges and Special Assessments" are a uniform amount on all tax parcels in this area.

The county has a web site in which the payments made for any street address can be looked up. Several nearby counties also have such sites.

I deduct the payment during whatever year it is actually paid

EA in California

[S T]

Calif Prop Tax

Yes Otis is correct, if you are in Calif, you do have to pay special attention to the property tax bill, as there are probably "special assessments" one of them might be "Mello Roos" or "special Assessments" that was attached to so many propreties particularly in So calif. The Calif property tax bill by county should be separately stated, but NOT always.

I am not seeing so many of those "Special Assessments" in some of the other States that I prepare - but we do have to be mindful to review and try to discern the proper amount of "actual property tax" or "ad valorem" tax that is assessed, and reduce the amount by "Special Assessments"

Sometimes a difficult job and difficult to explain to the taxpayer

Needless to say, you still only deduct the year in which the property tax was paid.

Sandy

[OtisMozzetti]

Mello Roos and assessments for improvements aren't what I meant

Yes Otis is correct, if you are in Calif, you do have to pay special attention to the property tax bill, as there are probably "special assessments" one of them might be "Mello Roos" or "special Assessments"...

Even aside from Mello Roos, and even aside from (special?) assessments for improvements, I was referring to "Fixed Charges and Special Assessments" which appear on the everyone's bills and which are composed of about $250 for "sewer service charge" and about $100 for various fixed amount parcel taxes.

[OtisMozzetti]

no, you don't just add up what checks were written

...do you just add up the total that your client paid to the county ... during the tax year?

Penalties for late payment of real estate tax aren't deductible.

Supplemental bill payments for prior year real estate tax are deductible.

If property changes hands, the real estate tax paid as part of the property settlement is prorated by the period of ownership. That reminds me of the client who brought along a self-prepared return and asked me "how will [the IRS] ever know?" that they could not deduct all of the real estate tax on the house they had bought during the year.

Also, if Mr. X and Ms. Y jointly (50% interest each) own real estate, perhaps each living there, and Mr. X pays all the real estate tax to the county and Ms. Y pays most of the grocery bills, I would say it is generally not OK for Mr. X to deduct all of the real estate tax that he actually pays to the County Tax Collector.