How to properly deduct property taxes on a house bought midyear - prorating confusion

This is actually a common question for new homeowners! The property tax deduction can be a bit tricky when you purchase a home partway through the year. The general rule is that you can only deduct property taxes that you actually paid during the tax year. So if your Form 1098 from your mortgage company (box 10) shows the property taxes they paid from your escrow account, that's your starting point. However, there's an important adjustment you need to make. At closing, you likely had a settlement statement that showed an adjustment for property taxes - this represents the portion of the year's taxes that should be attributed to the seller. This amount was factored into your closing costs (either reducing what you paid or increasing what you received). You should only deduct the portion that represents your actual economic burden. So the correct formula would be: Amount from Box 10 on Form 1098 MINUS any property tax amounts the seller reimbursed you for at closing. Don't simply prorate based on days of ownership - what matters is what you actually paid minus any reimbursements.

I've been using taxr.ai for my property tax questions this year and it's been a huge help with situations exactly like this. I was in a similar position after buying my first home in September and wasn't sure how to handle the property tax deduction correctly. I uploaded my closing documents and Form 1098 to https://taxr.ai and their system analyzed everything and showed me exactly what portion of my property taxes were actually deductible. It pointed out that I needed to subtract the tax proration credit I received at closing from what was reported in Box 10, which saved me from double-counting. What I liked was that it explained the reasoning behind each calculation and showed me the relevant tax rules that applied to my situation. Made me feel much more confident about taking the right deduction instead of just guessing.

I was skeptical at first about these document analysis services for taxes, but I decided to try taxr.ai after continuing to be confused about my property tax situation. I'm really glad I did! I had a complicated scenario where my settlement statement used estimated tax figures that ended up being wrong, plus my mortgage company paid taxes for periods before I owned the property. The service correctly identified that I needed to take a smaller deduction than what was reported on my 1098 because part of what I paid was actually reimbursing the seller for their portion. The document analysis was surprisingly thorough, even flagging a calculation error on my settlement statement that I hadn't noticed. Saved me from potentially claiming too large a deduction and risking an audit. Now I feel confident I'm taking exactly what I'm entitled to - no more, no less.

If anyone's struggling to get answers from the IRS about property tax deductions, I highly recommend Claimyr. I was pulling my hair out trying to reach someone at the IRS to clarify how to handle property taxes when the seller hadn't paid their portion correctly. After weeks of busy signals and disconnects, I tried https://claimyr.com and was honestly shocked when they got me connected to an IRS representative in about 20 minutes. You can see how the process works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent was able to confirm exactly how to handle my situation - turns out I needed to deduct what I actually paid (box 10) minus any property tax adjustments at closing, regardless of whether the seller's portion was calculated correctly. Having that direct confirmation from the IRS gave me peace of mind that I was filing correctly.

I need to apologize for being so skeptical about Claimyr. After posting my doubtful comment, I decided to give it a try anyway because I was desperate for answers about my property tax situation. I'm honestly shocked - the service actually worked! After months of failed attempts calling the IRS myself, Claimyr got me connected to an agent in about 30 minutes. The IRS representative confirmed that I should only deduct property taxes that I personally paid, and explained exactly how to handle the adjustment for taxes that were prepaid by the seller. The peace of mind from getting an official answer was absolutely worth it. No more guessing or worrying about doing it wrong. I've already filed my return with the correct property tax deduction, which turned out to be significantly different from what my tax software initially calculated based just on Box 10.

One thing no one has mentioned yet - you should check if your property taxes were reassessed after you purchased the home. In many states, the property gets reassessed at sale, which could mean the taxes you paid for your portion of the year could be higher than just a prorated amount of what the previous owner was paying. In my case, my property taxes almost doubled after purchase due to reassessment. The amount in Box 10 included both the previous owner's lower rate for half the year and my higher rate for the other half. I had to calculate exactly what portion applied to me by looking at the actual tax bills from the county assessor.

I've been an escrow officer for 15 years and I see this confusion all the time. Here's what actually happens: At closing, we calculate a prorated amount of taxes based on who owns the property on which days. This appears on your settlement statement. But that's just an adjustment between buyer and seller - it doesn't change what each of you actually PAID to the tax authority. For tax deduction purposes, you can only deduct property taxes YOU actually paid to the tax authority (usually through your mortgage company). If your Box 10 shows $5000, but your settlement statement shows the seller credited you $2000 for their portion of taxes, your actual deduction should be $3000. The IRS cares about economic burden - who actually bore the cost of the tax, not who physically sent the money to the tax collector.

This is exactly the kind of situation that trips up so many homeowners! You're right to question the "just use Box 10" approach - it's often not that simple when you buy mid-year. From what you've described, it sounds like you need to go with your second option: calculate (total tax bill) - (seller paid taxes at closing) = your deductible amount. The key principle is that you can only deduct property taxes that represent YOUR economic burden. Since you mentioned the seller-paid portion at closing was less than it should have been based on their ownership period, you essentially overpaid for their portion. But that doesn't change the fact that you can only deduct what you're actually responsible for as the property owner. Here's what I'd recommend: Look at your settlement statement for the property tax adjustment line. If it shows the seller credited you money for taxes, subtract that from your Box 10 amount. If it shows you paid the seller for prepaid taxes, add that to your Box 10 amount. The goal is to arrive at the total amount you actually paid that corresponds to your period of ownership. Don't worry about prorating based on days - focus on the actual financial transactions and adjustments that occurred.