We sold our home last November. During the year we paid property tax on the home, I'll say total of $6,000 for easy math. This is for the 2014 property taxes due in 2015. At closing we had to pay our share of the property taxes for 2015 which would be due in 2016, so we paid say $5,000 at closing. When it comes to Schedule A line 6, would I put the property taxes paid as $6,000 or $11,000? In the IRS instructions it says to reduce my deduction by the portion of property taxes refunded to me by the buyer, but since Illinois pays property taxes in arrears the buyer didn't refund me any tax, I had to pay the buyer my share of the taxes.
For property tax, you deduct the tax in the year that you actually pay it. So if you paid property tax during the year in 2015, and then you paid property tax again in November 2015 at closing (even if it was just to your buyer), you can deduct the total amount on your 2015 taxes.
When your buyer does his taxes, he will have to subtract the $5,000 that you paid him for property tax before he takes his deduction.
I faced this situation a few years back. Property taxes where I live are paid in arrears, so at closing I had to settle on the property taxes that I owed which the buyer would have to pay. I e-mailed IRS TaxHelp (unfortunately no longer available) to ask how this should be handled on my tax returns. This is the response I got:
They then provided information from Pub 17 (individual tax guide):
Also, don't forget that you're required to "pro-rate" your deduction based on how long you owned your home. From Pub 523: