Real Estate Taxes on Closing Statement

[Gretel]

Title company is holding in escrow real estate taxes from seller, which only can be paid to County after new assessment, probably not before 2010. However, the payment date is not known. Are these taxes deemed to be paid in 2009?

On closing statement it just says: hold & pay.

[Larmil]

Title company is holding in escrow real estate taxes from seller, which only can be paid to County after new assessment, probably not before 2010. However, the payment date is not known. Are these taxes deemed to be paid in 2009?

On closing statement it just says: hold & pay.

IMHO the taxes would be deductible in the year that they are paid to the county. It is the same as when a mortgage holder pays the real estate late.

[Roland Slugg]

Proration

There is a special rule for real estate taxes when property is bought or sold: The taxes MUST be prorated between seller and buyer, and the amount prorated to the seller is deductible by the seller if he itemizes his deductions. If the amount prorated to the seller is a credit amount, such amount must be offset against other real estate taxes paid by the seller. If the offset produces a net credit, it is treated the same as a refund of state income taxes ... taxable to extent there was a tax benefit received in the prior year.

[Gretel]

This hold back is something special. The proration has been done and I don't have any problems with it.

The thing is that the property has been re-surveyed and the County doesn't know until later how much taxes are owed. The closing statement taxes and the hold back are based on estimates. Part of the taxes are for the property sold (buyer's and seller's), part of the taxes are for the piece of property kept. The title company was required to put the full estimated amount in escrow.

I am still wondering though how the "normal" proration (where the date of the closing statement determines the time of deductibiliy or offset for taxes paid later) differs from the hold back. In both cases funds are debited/credited as of closing date.

[Roland Slugg]

"Re-surveyed" ... or reassessed?

If the special proration was based on a contingent liability, the amount will become fixed when the County issues its additional bill. At that time a corrected supplemental proration can be made, and the title company will presumably adjust the estimated amount to actual.

[Gretel]

"Re-surveyed" ... or reassessed?

If the special proration was based on a contingent liability, the amount will become fixed when the County issues its additional bill. At that time a corrected supplemental proration can be made, and the title company will presumably adjust the estimated amount to actual.

That is exactly what will happen. Since, at that point, there will be a money exchange, the date of this exchange will be the date the real estate taxes are deductible. I can see this more clearly now.

Then the credit received from the buyer should offset the actual bill at the same time (2010) or in 2009 already with no expenses against it?