Property Taxes

[Earl]

Client bought a house out of foreclosure. He had to pay $2,000 in back taxes (several years)
at the time he bought the house. Are these taxes currently deductible or will they be added
to basis.

[ATSMAN]

Client bought a house out of foreclosure. He had to pay $2,000 in back taxes (several years)
at the time he bought the house. Are these taxes currently deductible or will they be added
to basis.

I had one such situation and after research we added the payments made at the time of purchase (back taxes, auction fee and a few other items) to the basis.

[TAXNJ]

530

see ATSMANS post reply and also Refer to IRS pub 530: in general "Delinquent taxes. Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. You treat them as part of the cost of your home. See Real estate taxes , later, under Basis."

[Toobusy]

Property Taxes

Client bought a house out of foreclosure. He had to pay $2,000 in back taxes (several years)
at the time he bought the house. Are these taxes currently deductible or will they be added
to basis.

Real Estate Taxes, City/town Taxes and County Taxes are deductible beginning on the date of Sale. The back taxes date doesn't matter, what matter is the date the taxes were paid. If they were paid in 2015 and he is the purchaser, he can use them on his tax return.

[TAXNJ]

Missed

Real Estate Taxes, City/town Taxes and County Taxes are deductible beginning on the date of Sale. The back taxes date doesn't matter, what matter is the date the taxes were paid. If they were paid in 2015 and he is the purchaser, he can use them on his tax return.

Maybe misread TTB tab 4-9 and IRS pub 530 or missed that part in reading about delinquent taxes of seller paid by buyer. Will you provide the source.of your post reply.

[Toobusy]

Property Tax

Maybe misread TTB tab 4-9 and IRS pub 530 or missed that part in reading about delinquent taxes of seller paid by buyer. Will you provide the source.of your post reply.

It is in 2015 Taxbook, page 6-2 "Tax Treatment of Settlement Costs on Purchase or Sale of Real Estate" . However, this is referring to Investment Property, and if that what he has, then it will fit. (I quess I jump on that because that is what I am doing now). The part about the "delinquent taxes, I read in a tax publication, (IRS or NATP - forgot exactly which) but it was referring
property tax treatment on Sch A.

[TAXNJ]

Still

It is in 2015 Taxbook, page 6-2 "Tax Treatment of Settlement Costs on Purchase or Sale of Real Estate" . However, this is referring to Investment Property, and if that what he has, then it will fit. (I quess I jump on that because that is what I am doing now). The part about the "delinquent taxes, I read in a tax publication, (IRS or NATP - forgot exactly which) but it was referring
property tax treatment on Sch A.

Must still be misreading compared to what you state. Because TTB 4-9 and IRS Pub 530 and TTB 6-2 all state for the BUYER" deductible beginning on the date of sale" both Home or Rental/Investment Property.

Still confused where you are reading that the delinquent R/E taxes of the Seller paid by the Buyer are deductible by the Buyer rather than adding to the basis.

[Lion]

You have to be legally responsible for the taxes AND have paid the taxes. You were not legally responsible for taxes assessed before you owned the property. New tax assessments from your purchase date are your responsibility. Not an issue I'm dealing with now, so not looking it up -- but do some further research before you complete this return.

[New York Enrolled Agent]

A follow up to Lion's post. IRC §164 and the accompanying regulations are clear - the general rule is that taxes are deductible only on those on which the tax is imposed. The relevant exception is for apportionment of taxes between buy & seller for real estate taxes for the year of sale only.

The part about the "delinquent taxes, I read in a tax publication,

It appears you misinterpreted what you read - there is no provision to take a current deduction paid for delinquent r.e. taxes.

[Burke]

Client bought a house out of foreclosure. He had to pay $2,000 in back taxes (several years)
at the time he bought the house. Are these taxes currently deductible or will they be added
to basis.

In reality, the taxes were paid at closing by the seller/owner. The seller/owner collected the money at the time of sale and remitted it to the locality. It really just increases the sale price for the buyer, and therefore is part of his basis.

[Roland Slugg]

In reality, the taxes were paid at closing by the seller/owner. The seller/owner collected the money at the time of sale and remitted it to the locality. It really just increases the sale price for the buyer, and therefore is part of his basis.

The OP says this was a foreclosure. Thus, the former owner didn't sell the house at all, and he certainly didn't pay the delinquent real estate taxes. The buyer/new owner paid them.

As some have correctly stated above, the buyer may only deduct those taxes for periods he owns the property. Delinquent taxes that pre-date his acquisition must be capitalized. In that way they will eventually serve to reduce the gain (or increase the loss) upon the property's sale.

[Burke]

The OP says this was a foreclosure. Thus, the former owner didn't sell the house at all, and he certainly didn't pay the delinquent real estate taxes. The buyer/new owner paid them.

As some have correctly stated above, the buyer may only deduct those taxes for periods he owns the property. Delinquent taxes that pre-date his acquisition must be capitalized. In that way they will eventually serve to reduce the gain (or increase the loss) upon the property's sale.

I should have said "the seller/owner's agent" collected those taxes as part of the purchase price at closing, and remitted them to the county. In this case the seller/owner was the bank or whoever foreclosed on the property. I doubt very seriously if the buyer went down to the locality and paid them himself directly. In any event, everyone agrees that they are capitalized to basis so no change in that position.