property tax deduction on rental property

[DVM gone riding]

Hopefully I can explain this ok.

In Aug of 2013 I bought a rental house with the owner carrying the mortgage contract. Because of this property taxes for second half (we pay taxes april/oct in my state) weren't paid at the time of purchase. I was given a "credit" on the purchase from the owner and paid the taxes in full in october--I have receipt and check to this affect.

Do I deduct the taxes in full against the income of the place for the year and adjust the purchase price and depreciation by the credit on the purchase or do I use the full purchase price and change the property tax deduction by the credit?

If it matters the credit was for about 200 and taxes where about 1200 total

Thanks!

I do my own taxes via TT

[mwcpa]

the "deduction" for real estate tax is the amount you paid less the credit you received at purchase for assuming the debt.

your purchase price would be increased by this credit.

assume.... hud-1, all in purchase, including the credit, but excluding any escrow deposits is 105,000.

the "credit" given to you for paying the taxes that should have been paid by the prior owner is 5,000.

you paid the real estate tax bill of 7,500.

your "basis" in the land and property is 105,000 plus the credit of 5,000 or 110,000.

your "real estate" tax deduction is the 7,500 less the 5,000 credit or 2,500.

check

Hud-1 all in 105,000 + taxes paid 7,500 = total costs 112,500

Building and land basis 110,000 + real estate tax deduction 2,500 = total cost 112,500

[DVM gone riding]

Could I just use the listed purchase price. no escrow etc. for the basis and then take the "credit" off what I paid for property taxes?

stated purchase price 150000

after credits actual and deposits and what ever other numbers they come up with mortgage price is 135000

Wouldn't I just use the purchase price for setting up the depreciation and then take the credit and subtract it from what I actually paid in taxes?  Am I making it more complicated than it needs to be?

So property tax deduction is 1200-200 credit=1000 deduction?  I didn't think I could count the taxes for the basis but rather against the income?

[mwcpa]

"Could I just use the listed purchase price. no escrow etc. for the basis and then take the "credit" off what I paid for property taxes?"

you could, but then you would lose the depreciation on the other capitalized closing costs, such as title insurance, legal fees, etc.