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February 14, 2023
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Can property taxes paid at closing be considered a selling expense when selling a rental property?

  • February 14, 2023
  • 1 reply
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Hello,

I understand that I am allowed to deduct from the sales price various selling expenses that includes the following list:

  • advertising
  • appraisal fees
  • attorney fees
  • closing fees
  • document preparation fees
  • escrow fees
  • mortgage satisfaction fees
  • notary fees
  • points paid by the seller to obtain financing for the buyer
  • real estate broker's commission
  • recording fees (if paid by the seller)
  • costs of removing title clouds
  • settlement fees
  • title search fees
  • transfer or stamp taxes charged by city, county, or state governments.

Though not listed, can I also deduct any prorated property taxes paid at closing?

Typically, when a property is sold, the seller pays any property taxes due up to the closing date.

 

I have read online that I can consider the paid prorated property taxes as selling expense versus treating it as a rental expense but just wanted confirmation.

 

Thanks in advance.

Best answer by DavidD66

No, property taxes paid at closing are not sales costs and cannot be used to reduce the sales proceeds.  They are a deductible rental expense you can claim on Schedule E, if the property was still a rental prior to selling.  If the property had no longer been a rental (e.g. converted to personal use, or taken off the market to sell) the the property taxes are deductible as an itemized deduction on Schedule A, subject to the cap on state and local taxes.

1 reply

DavidD66Answer
February 14, 2023

No, property taxes paid at closing are not sales costs and cannot be used to reduce the sales proceeds.  They are a deductible rental expense you can claim on Schedule E, if the property was still a rental prior to selling.  If the property had no longer been a rental (e.g. converted to personal use, or taken off the market to sell) the the property taxes are deductible as an itemized deduction on Schedule A, subject to the cap on state and local taxes.

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February 14, 2023

Thanks for the clarification!