House Tax Deductions?

Question

I bought my house in nov 2005. During closing in nov 2005, the seller paid me say $3000 for the tax she owned from Jan-Nov 2005.

In May 2006, I got the house tax bill of say $3500. I paid that amount.

Now in Feb 2007, when I am filing my income tax returns, do I put $3500 for tax paid or do I say I paid $3500-$3000 = $500?Please advice.

Some of my friends tell me that seller paid me in 2005. That is history. I paid my house tax in 2006. And since I am filing income tax returns for 2006, I should put what i paid in 2006. Which is $3500.

I feel that is wrong both ethically and legally.

Please advice.

Answer 1

As individuals, we are cash basis tax payers.

You paid $3,500 in 2006 so you deduct $3,500.

The $3,000 you received in 2005 should have went against how much you paid in 2005.

Neither was illegal or unethical because you didn't know. It's just called not knowing because you're not an accountant. If you want to do the right thing, then amend your 2005 tax return. If not, don't worry about. The chances that the IRS will audit you or catch that mistake is pretty much zero.

Answer 2

The $3000 from the seller was prorated for tax year 2005. Seems she paid January thru Oct. (and was delinquent). You were only responsible for Nov & Dec. That has nothing to do with your 2006 taxes you are now filing. What are you worried about?
I am curious how you reported it on 2005 Schedule A though. LOL

Answer 3

It appears to me you took ownership of the house with back taxes owed, and the seller took a discount off the purchase price of the house since you were going to pay off the back taxes. You cannot deduct those taxes since you did not own the house at the time the taxes were incurred.

You can deduct taxes paid for the period November 2005 through December 2006 that you paid in 2006.

Answer 4

If the bill you received in May of 2006 was for the 2005 taxes, your net payment for 2005, paid in 2006, is $500.

Answer 5

About as wrong as you taking their money and then acting like you were scammed. The fact is that money was taken from the price of the home that should have gone to the seller and put back on your side of the balance sheet so that you could pay those taxes when they arrived. If you claim all of those taxes as being paid by you, you have scammed the seller. And if the sellers claim their portion to which the are entitled on their taxes, just keep saying novenas to the Mother Mary that you never get caught if you also claim the full amount.

Hey, Bostonian, always delightful to see the sound of reason on the horizon.

Answer 6

If you are itemizing on schedule A, report the total almount of the property taxes. That is what you paid. That is what the county charged you. That is what would be looked at if you would ever be asked to produce proof of tax. You just had a really nice seller.