Annual taxes deductable if given property mid year?

Question

I'm being given a free and clear rental property Oct 1st. The property is tenant occupied. I will be responsible for paying the annual 2023 property tax in december. Can I deduct the full annual amount, even though I only owned the property for the 4th quarter of the year (I'm not being given a reimbursement from grantor for jan-sept taxes)

similar question with insurance. If I pay an annual policy in October, can I deduct the full amount paid on my 2023 taxes, or just 3 months?

Michael Plaks · Answer

@Alan Ferden

You received two contradicting answers from two CPAs. The correct answer came from @Joseph Palmiero.

Joseph Palmiero · Answer

You can deduct 1/4 of the real estate taxes.  This is the amount owed by you from October 1st until the end of the year.  The other portion would be added to the cost of the property and depreciated.

The insurance can be deducted in full.

Account Closed · Answer

When you acquire a rental property and are responsible for expenses like property taxes and insurance, the tax deductibility of these expenses depends on when you actually pay them. Here's how it typically works:

• Property Taxes: You can generally deduct property taxes for the year in which you pay them. Since you will be responsible for paying the annual property tax bill in December 2023, you can deduct the full annual amount on your 2023 tax return, even though you only owned the property for the last quarter of the year. The fact that you aren't being reimbursed for the taxes paid by the previous owner for the months before you took ownership doesn't impact your ability to deduct the full annual amount you paid.
• Insurance: Similar to property taxes, you can typically deduct insurance premiums for the year in which you pay them. If you pay the annual insurance premium in October 2023, you can deduct the full amount on your 2023 tax return, even though you only owned the property for the last quarter of the year.

It's important to maintain proper records and documentation of these payments, including receipts and copies of bills, to support your deductions in case of any future tax inquiries or audits. Additionally, consult with a tax professional or CPA to ensure that you are following all tax rules and regulations related to your rental property, as tax laws can change, and there may be specific nuances to consider based on your individual circumstances.

Annual taxes deductable if given property mid year?

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