Discussion:Deduction of Property Taxes Paid By Lender

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Discussion Forum Index --> Advanced Tax Questions --> Deduction of Property Taxes Paid By Lender


Discussion Forum Index --> Tax Questions --> Deduction of Property Taxes Paid By Lender

Debenz (talk|edits) said:

7 March 2009
This is a cash basis individual taxpayer:


If you are going through foreclusure and the lender pays the property taxes through your impound account and then adds the property taxes to the balance on your loan, can you deduct the property taxes in the year the lender paid them. I think the answer is no because the taxpayer did not pay the taxes and is essentially going to walk from the loan.

Thanks for you help and have a great tax season!

Taxea (talk|edits) said:

7 March 2009
Is it "your" money in the impound account? Are you walking away from the loan in the year the taxes were paid? taxea

Riley2 (talk|edits) said:

7 March 2009
Generally, if the amount advanced was discharged, the taxpayer would recognize neither the discharge income nor the property tax deduction.

Debenz (talk|edits) said:

7 March 2009
Taxea - there was no money in the impound account to pay the taxes - the lender paid the taxes and no the taxpayer is not walking away in the year the taxes were paid which is 2008 - the transaction should completed in 2009..

Rily 2- the amount was not discharged in 2008 the year the lender paid the taxes

Taxea (talk|edits) said:

7 March 2009
If your client got a 1098 from the lender for 08 then the client can take the deduction. Leave the 09 problem for 09. taxea

Riley2 (talk|edits) said:

8 March 2009
Debenz, let me clarify my last comment. If the lender added the property taxes to the principal balance on the mortgage, then the homeowner would recognize neither debt discharge income nor a deduction for the amount of the taxes. In other words, the debt discharge income would be reduced by the amount of the property taxes. See Sec. 108.

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