Property Tax

[TAX]

Client filing MFJ.

In Illinois, real estate taxes are due one year later. (Not in the same year)

Client, "S", Sold home in Aug 1, 2011 to buyer "B". On Closing statement Seller "S" gave credit of $10,000 for property tax from Jan 1 to July 31st 2011 to buyer B.

I am preparing 2011 return for Seller "S".

Can Seller "S" deduct property tax of $10,000 on sch A?

I think he can as he paid taxes which were due in 2012 for 2011 to Buyer "B" based on TTB 4-9 explanation.

Just confirming.

Thanks!

[Koss]

Agree

In the scenario you described, the buyer gets no deduction for property tax on his 2011 tax return. He won't really pay any tax until 2012. Your client, as you noted, actually paid tax, during 2011.

The buyer often doesn't understand this issue. The buyer gets a 1098 that shows an amount of property tax paid, and they did in fact pay it, but they were reimbursed for it, because it is tax for a period of time that they did not actually own the property. Inexperienced tax pros routinely screw this up.

And if the buyer doesn't have an escrow account, you may never get them to understand why they can't take a deduction, because they actually had to write a check to the county treasurer, during 2011.

But you're right--it is the seller that gets the deduction.

BMK