Taxes question
I bought a townhouse last year after living in an apartment for years. I pay into an escrow account for my taxes. I know I can deduct the mortgage interest. But can I deduct the taxes? I took possession of the place on April 19, so my thinking is I can deduct taxes from that day forward. Coming back 5 minutes later to edit: even though I put the tax money in the escrow account, taxes haven't been paid since taxes here are paid a year behind. So the prvious owner paid 2004 taxes in 2005 and THIS YEAR I'll pay 2005 taxes. Correct???? |
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Your property taxes are deductible. I don't know about the pay a year behind structure you mention, but if you did not yet paid taxes for your house in 2005, you will have to wait until next year to include it in your deductions.  |
| To just restate what Tammy just said, you take the deduction in the tax year that you make the payment.
So, almost all of us US citizens are now working diligently (HA!) on our taxes for the year 2005. If you made any tax payments in 2005 you can take the deduction. Check your paperwork (The "settlement" document, if I recall correctly) for the closing to see if you paid any taxes at closing. Ensure that you understand what you are seeing, some may have been made by the seller... Also since you pay into an escrow account, they will itemize both interest and taxes paid on your behalf on for 1098 --which they should be sending to you. |
| Speaking of taxes....... I used turbo tax to do my taxes this week ANYBODY ELSE USE IT????
I've used it for several years in a row with excellent results. This year when I went to print my return it told me that there was a "form not finalized" After some phone calls back and forth the explanation I got (from Turnbo Tax) was that my filing requires an education expense (my daughter is in college) form that the Governement has not finalized yet and I have to wait for the Government to finalize the form before filing my taxes. Does that make sense to anyone???? Doesn't it seem that the Federal Government should already have the forms finalized????? Does anyone know if there is an phone number to call to find out about forms??? |
| As a Real Estate Agent I know that you had to pay some taxes at closing.
Check your closing statement. Also any interest you have paid from the date of closing until Dec 31st is deductable. |
Just checked with the county assessor. 2004 taxes were paid in 2005 (hey, it's basically a farming county--we're a little behind!). So I don't get to deduct until next year,  even though the money is in an escrow account (I think of it as the holding pen). But my 1098 does list taxes which just means payment into the escrow account. |
| I love turbo tax! i used it last year, and it really helped. We had to deal with Mike's having been overseas, which really threw the tax situation for a loop, anb that program sorted it all out for me, although it did take me a while. I'm definitely using it again this year. Here's a question though- do you have to buy a new program every year??? |
| Karen,
I think you need to update the software to make sure all the taxe codes are up to date. Check for a section to update the software in the actual programs. You should get free updates at least for a while. |
| And, I think you can download them without having to actually go out & buy a new program. |
| We had to buy a new program. The program from last year said 2004 only. I know Turbo Tax has lots of different editions so there may be a SUPER DELUX Edition that you can down load upgrades. BUT the one for this year which included the State Tax was on sale at Wal Mart for less than $40.00 and you can do 5 different returns on it so I don't know how you can beat that.
And by the way, my taxes are done and I'm getting enough back to get my leather couch WOOOHOOOOO!!!! |
| No no no no no. You go by the 1098 form. If it lists taxes paid, then deduct those taxes on your return.
The 1098 doesn't list taxes you've paid into the escrow account, it lists taxes they've paid on your behalf to the city/town/county/whatever. There may be a separate accounting of your escrow account enclosed, but if the 1098 says it's paid the monies, take the deduction. The 1098 is reported to the government and will tell the government that you've paid the taxes, too. Also, you may have paid the taxes at the closing which sometimes are reflected accurately on the 1098. This is good news! |
| Ugh. Too many forms! That's why I go to my handy dandy accountant! |
| I only have 2 forms--my W2 and the 1098. I refuse to pay an accountant money when I can conquer this myself!!!
And Ron, if the taxes haven't been paid, how can I claim them?????? |
| Paula, the taxes were paid, that's what the 1098 is saying. Your town only said that taxes were paid for 2004 in 2005... it's my guess that YOU paid them!
You get to deduct them based on when they are paid, not based on for what year they are due. If you pay them a year early you take the deduction that early year. If you fall behind and pay for two years, you get the deduction late, too. You should have received, maybe in July or August, an estimate of your escrow account... where they show what they've paid and predict what expenses will be coming and when, project your escrow balance "low point" and adjust your escrow payment accordingly. Looking at that might help to understand what they've paid. Again, the 1098 says: "We paid these taxes on your behalf, and this is what we're telling the IRS". |
| Ron, I'll look again at my 1098. I did receive an escrow statement over the summer and they did adjust my payment. But I certainly wouldn't have paid 2004 taxes on property I didn't own. |
| Great.
Well, ya never know. If the taxes aren't due until after you take possession.... Anyway, if I recall I had to pay daily taxes for X number of days because they had already been paid by the seller. Or the other way around. It was in 1992, and my memory isn't what it used to be. |
| I never bought a house yet where the taxes weren't pro rated so that the seller got EVERY PENNY they were due for the taxes (down to the minute of the closing I think!!). Even though it's actaully paid to the seller it's listed as a closing expense for taxes so it's deductible for taxes.
For example, Last year when I filed my taxes I had paid prorated taxes to the man I purchaed the property from at closing but I was able to claim those taxes as a deduction because they were listed as taxes on the closing cost. I closed on my property in June so the prorated school taxes from June to September (when our school taxes are due) were deductible in addition to the NEW TAXES which I paid in September. Normally thoses pro rated taxes would have been paid in the previous calender year and would have been deducted on the previous years taxes. So... when you purchase property "mid year" and make a pro rated tax payment and then make a full year tax payment you have that one time advantage of an "extra" deduction. I know that last year with seeling one house and buying another that was one of the things that really helped me with my taxes. Of course that may not be what you are talking about at all and I have just rambled on about something that has nothing to do with anything but since I have spent the last two days up to my (only slightlty drugged) eyeballs in tax forms I felt it was a bandwagon I needed to jump on 
Which brings me to another thought...... If I mail my taxes tomorrow, get audited, and discover that I've really messed them up.......do you suppose the IRS will buy the excuse that I just had my gall bladder out and wasn't thinking straight  Maybe I should hang on to them and recheck them next week................................................. |
| I'm with Ron, if there is a tax amount on your 1098, you should include it in your tax filing. There may have been a tax payment settled at closing. Plus, property taxes are typically paid in 2 installments per year so if you've owned the property for more than 6 months you should have paid at least one installment.
Give your mortgage lender a call and ask them when the tax disbursements were made that add up to the amount on your 1098. |
| I would like to take this opportunity to tell you all how to do your taxes. January 1, buy large cardboard box. Until December 31 place every scrap of paper you come in contact with into the box. Take said box to ACCOUNTANT and abradadabra Taxes!
That being said, we have to use an accountant for our business so he does our personal taxes too. He always yells because I don't buy enough stuff through the year. I'm supposed to deduct all the clothes that I buy for teaching dance lessons. I love that man, he gives me a reason to shop! |
Quote: And by the way, my taxes are done and I'm getting enough back to get my leather couch WOOOHOOOOO!!!!
Great idea!!! I can't wait to get our refund check now! I'm guessing we will do the same thing w/it! Thank you Jordan for being born in 2005! |
| Ya gotta love those little deductions!!! |
Tasker's Mom wrote: Speaking of taxes....... Doesn't it seem that the Federal Government should already have the forms finalized?????
I am self employed and had to do about 56 W-2s this year. I ordered all the forms in early December and on January 27 got a letter from the IRS.....THEY WERE OUT OF FORMS  Had to scramble to get them and paid almost $50 for them  On a happy note they were sent out on time  |
| I don't even know if we claimed ours - it's confusing with hubby's deployments (some are tax-free zones), school, boys preschool, etc... so we let a cpa do all the work. She's WELL worth the money too! lol We always get a nice check back. |
bestdogsx4 wrote: Tasker's Mom wrote: Speaking of taxes....... Doesn't it seem that the Federal Government should already have the forms finalized????? I am self employed and had to do about 56 W-2s this year. I ordered all the forms in early December and on January 27 got a letter from the IRS.....THEY WERE OUT OF FORMS Had to scramble to get them and paid almost $50 for them On a happy note they were sent out on time Funny how the Government can be late but WE CAN'T BE!!!!!! I did find a site through TURBO TAX that lists the release dates on some of the forms that I need, some won't even be finalized til late February. GO FIGURE!!! I doubt the IRS would accept the excuse, "my taxes haven't been finalized" as a reqason for not filing by April 16th!!!!! |
| O.K., you've convinced me. There is a line item on my 1098 for taxes paid, and on my closing papers there are line items on my side for taxes that add up to that line on the 1098. I'm going to deduct them. Even if it's wrong, I'm doubting the IRS would notice. I'm a little fish in a big pond! |
Tasker's Mom wrote: I doubt the IRS would accept the excuse, "my taxes haven't been finalized" as a reqason for not filing by April 16th!!!!! Actually, that is Form 4868, "Application for Automatic Extension of Time to File U.S. Individual Income Tax Return"Quote: Beginning with 2005 returns due in 2006, individuals will be able to use a single IRS form (Form 4868) to get an automatic six-month extension of time to file. This will replace the existing two-step process under which an automatic extension was only allowed for four months, generally until Aug. 15. If more time was needed, a taxpayer had to explain why, using a second extension request form (Form 2688). About 6% of individual taxpayers request the initial four-month extension, and about a third of those go on to request a second extension, usually for two months until October 15. Form 2688 will be eliminated.
Extension procedures will also be streamlined for business taxpayers, thus eliminating three existing forms. Under existing procedures, only corporations can request an automatic six-month tax-filing extension. The new regulations will also make this option available to most noncorporate business taxpayers, including partnerships and trusts. Accordingly, starting Jan. 1, all eligible business taxpayers will use Form 7004 to request an automatic six-month extension of time to file. In the past, eligible noncorporate business taxpayers had to request an initial three-month extension and, if more time was needed, then request another three months. Treasury Decision 9229 is available on this Web site and will be published in the Federal Register on Nov. 7, 2005. http://www.irs.gov/newsroom/article/0,, ... 56,00.html OK, everyone in unison: "We want a flat tax! We want a flat tax!" oh wait... "We want a national sales and/or value added tax" Sounds like a "Food for Thought" discussion to me! |
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