Real Estate Taxes

Property tax is deductible on your tax return when paid out of escrow to the taxing authority not when you make your monthly payments to the escrow account. Penalties and interest paid on late payments are not deductible. Special assessments for sidewalks,sewer upgrades, etc. are generally not deductible because they may increase the value of your property. In the year of sale of property, the property tax is prorated between the buyer and seller on the closing statement and can be deducted for the period of ownership.