Property Tax deductions when there is an overpayment and refund the following calendar year
January 5, 2012 11:39 AM Subscribe
My mortgage company overpaid my property taxes and is aware of the overpayment. On my 2011 income taxes, do I deduct the actual amount due, or the amount paid?
posted by tckma to work & money (8 answers total) 1 user marked this as a favorite
I purchased a house this year and closed in May. Property taxes in my area are assessed by the county, and the tax year runs from July 1st to June 30th. Property tax payments are due twice a year, on September 30th and December 31st. My property taxes are paid by the mortgage company, from an escrow account.
During the process of buying the house, I became aware that the property was over-assessed. I filled out a form at closing appealing the assessment for tax year 2012 (July 1, 2011 to June 30, 2012). The mortgage company was aware of the appeal and I kept them informed and sent them relevant documentation during every step of the appeal process (I presented my case at two separate hearings). I won the appeal and had the assessment reduced, but this happened after the first installment of 2012 property taxes had already been paid. As a result of the appeal, I received a revised second installment bill from the county, showing the new, lower amount due. I forwarded this bill to the mortgage company.
In spite of the fact that I sent the revised bill, and received confirmation that it had been processed by the mortgage company's tax office, the mortgage company still paid the original (higher) amount for the second installment of property taxes. The county website shows receipt of the second payment on December 24th, and that 2012 property taxes are "paid in full," but it shows that only the revised (lower) amount due was paid (there is no proof of the overpayment, but, I have a printout of this website showing the taxes as paid in full).
I called the mortgage company, and the customer service person I spoke to conferenced in the county tax collector's office. The county tax collector stated that they would refund the overpayment to the mortgage company. The mortgage company customer service agent then said they would write a check to me directly for the amount of the overpayment as soon as they received the refund from the county. (I have no written proof that this will actually occur, as this was all stated in a telephone call. I do have written proof that the mortgage company overpaid the taxes in the form of a printout of "tax and insurance payments" from the mortgage company's website.)
Since I will (presumably) be receiving the refund in calendar year 2012 for taxes overpaid in calendar year 2011, how does this work in terms of deducting property taxes from my 2011 income taxes? Do I report the amount of taxes actually paid, or the amount of taxes that should have been paid? How does that carry over for 2012 income taxes, and property taxes to be paid in 2012?
I have owned a house before (sold in 2009 due to a move to another state), but with that house, I paid my property taxes myself directly (outside of the mortgage). Therefore, I kept track of the amounts paid myself for income tax deduction purposes. The town (in that case) had the same July 1 - June 30 tax year, with taxes due in four installments (8/1, 11/1, 2/1, and 5/1). For income tax purposes I reported the property taxes I paid during the calendar year regardless of the tax year -- so, for example, for 2006 income taxes I reported the last two payments on 2006 property taxes (due 2/1/06 and 5/1/06) plus the first two on 2007 property taxes (due 8/1/06 and 11/1/06). I don't remember if there is a space for property taxes paid from escrow on the 1098 form (I have yet to receive it, but it is still early January) -- which would answer my question as to what amount is reported.
My house was reassessed again for tax years 2013-2015 (the county is on a 3 year reassessment cycle), and my assessment was even further reduced. When will my monthly mortgage payments be readjusted? If they are readjusted in May (as I suspect), they will not reflect the second drop in the assessment, as I will not receive another property tax bill until July.