November 2017 // Real Estate & Home Builders Guide // 15W
Who gets property tax deduction
on house in estate limbo?
By Ilyce Glink
and Samuel J. Tamkin
Tribune Content Agency
Q
: My grandma’s house is in
probate, as she passed last
year. Her grandchildren have
been living in the house and
paying the property taxes. Who
gets the tax deduction for those
tax payments?
: We’re sorry for your loss.
One question comes to mind:
Who actually owns the property
now that your grandmother has
died? There are many possible
answers.
It’s possible your grandmother
left the home to the grandchildren
who are living in the property
through a will or a trust. Or she
A
might have named someone else
the owner of the property. Was
there a co-owner of the property,
perhaps a child (your parent
or aunt or uncle) or someone
else who was on title? If your
grandmother didn’t have a will
and the property wasn’t in a trust,
it’s possible that all of her nearest
relatives might own a piece of the
property, which would then be
divided according to state law.
Usually, the homeowner that
pays the real estate taxes gets the
tax deduction. And, typically,
the ownership of the home and
payment of real estate taxes go
hand-in-hand. In this case, it
sounds as though Grandma may
have moved out of her home for
what we assume was medical
reasons, and the grandchildren
moved in to either take care of her
or the property itself. That may
have included paying property
taxes.
If the grandchildren are in
the process of obtaining title to
the home through the probate
court (or if there were no will
and no other closer relatives
such as adult children), state law
would likely give the home to the
grandchildren. Through probate,
the grandkids would have title
coming to them, and in anticipa-
tion of that ownership they would
pay the real estate taxes. If that’s
the story, the grandchildren may
be entitled to take the deduction.
However, there are some other
considerations when thinking
about taking a real estate tax
deduction, particularly given that
your grandma recently passed
away, and it doesn’t sound as
though the estate is closed.
If the grandchildren choose
to take the standard deduction
on their federal income tax
return, they would be ineligible
for a real estate deduction.
Homeowners frequently believe
they will get a great benefit from
mortgage interest and real estate
tax deductions; however, when
those payments are less than the
standard deduction, the standard
deduction is more valuable than
itemizing deductions.
Having said that, usually the
estate of the deceased pays all the
expenses relating to the property
until the property is transferred to
the intended heir. The estate would
still have legal title to the home
and would pay the real estate
taxes. And in this instance, the
estate’s tax return would include
the payment of real estate taxes.
Given your situation, it’s
possible that the person who has
the right to the title and pays the
real estate taxes is entitled to take
the deduction on their federal
income taxes.
For more information or
specifics in your situation you’ll
need to talk to your accountant,
enrolled agent or tax preparer.
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