How to handle property taxes paid in arrears for first year home ownership - accounting for 2025 taxes

Thanks for explaining this! Quick follow-up question - what about the credit I received at closing? I technically "paid" those taxes by getting less credit at closing, right? Shouldn't I be able to deduct that somehow on my 2024 return?

The property tax credit at closing is actually considered part of the real estate transaction, not a tax payment you made. The seller is essentially reimbursing you for their portion of the property taxes that you'll be responsible for paying in February 2025. This credit reduces your basis in the home rather than creating a deductible expense. Think of it this way: you're getting money from the seller that you'll later use to pay property taxes. When you actually make that payment in February 2025, that's when you can claim the deduction on your 2025 tax return.

How does taxr.ai work? Do you just upload your closing documents and it figures everything out? I'm worried about missing something on my taxes this year after buying a home.

I've heard about these AI tax tools but I'm skeptical. Can it really understand something as specific as property taxes paid in arrears in different states? Some states have weird property tax rules.

You upload your documents (closing statements, tax forms, etc.) and their system analyzes them and explains what's deductible and when. It's really thorough and picks up on things like property tax credits, points, and other closing costs that have tax implications. Yes, it actually does handle state-specific tax rules! That's what impressed me - it knew about my state's property tax calendar and explained exactly how the arrears payment affected my federal deductions. It even flagged some state-specific deductions I would have missed.

Wait, how does this actually work? I've tried calling the IRS multiple times and just get stuck on hold forever. Do they somehow skip the line for you?

This sounds like BS honestly. Nobody gets through to the IRS. Even tax professionals can't get through most of the time. I'm supposed to believe some service magically gets me to the front of the line? Yeah right.

It doesn't skip the line - it uses technology to wait on hold for you. When you sign up, you put in what you need help with, and their system calls the IRS and navigates the phone tree. When they finally get a human on the line, you get a call back and get connected directly to the IRS agent. I was skeptical too! But it literally saved me hours of hold time. The IRS is actually pretty helpful when you can actually talk to someone. I got clear answers about my property tax situation that I couldn't find anywhere online.

This is interesting - so the timing of when escrow makes the payment could change everything? I wonder if my lender is planning to make the payment in Dec 2024 even though it's not due until Feb 2025. How would I find this out?

Check your online mortgage account or call your loan servicer and ask for their "escrow analysis" or "escrow payment history." Most have online portals where you can see exactly when payments were made from your escrow account. Some lenders do make property tax payments early, especially if the due date is early in the following year. The IRS rule is that you deduct the tax in the year it's actually paid by you or your lender, regardless of when the county considers it "received" or what tax year it's for.

I used TurboTax last year for this exact scenario. When it asks about property taxes, only enter the amounts you ACTUALLY paid in 2024. Don't include the credit amount from closing. When you make the payment in 2025, you'll enter that amount on next year's return. TurboTax has a section specifically for home purchase where you enter closing costs, but the property tax credit doesn't go there either - it's just an adjustment to your basis.