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(Assume) I rented out my condo in Illinois from Jan 1, 2018 to December 2018. In Illinois, property taxes are paid in arrears, so during 2018 I paid my 2017 property tax bill, and I haven't yet paid my 2018 property tax.

When filling out out my schedule E for 2018, do I put down under Line 16 (Expenses: Taxes) what I paid in 2018 for my 2017 property taxes? I'm not sure how it would work otherwise but wanted to check.

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When you pay item like property tax or insurance only once or twice a year, that means you have to allocate that payment to the months that are covered by that tax form.

When paying the bill forward, like an fire insurance bill, some of the covered months may not be in this tax year. I document which months are covered by the payment for this year and claim the rest the following year. I make a electronic copy of the bill and put it in the folder for the next year.

If you are paying in arrears you will have to do something similar. If 2018 was the first year you were renting the property after converting it from personal use, that means that any bill you paid in early 2018 could have covered months where it wasn't rental property, So don't forget to claim that in your itemized deductions. If you bought the property just to rent it, make sure that any tax you paid during closing is properly accounted for.

For your rental exact question:

You paid a tax bill in March of 2018, that covers the months of January 2017 to December 2017. On the forms you will submit in April 2019 you allocate the payment for the days in 2017 it was personal property (schedule A) and the days it was rental property (schedule E).

If you can pay your property tax bill before the end of the year, you can shorten the delay on getting to claim it, but that requires your jurisdiction to bill you before the end of the year.

comment about ending the rental: starting and stopping a rental property cause complexities during the first and last year. Items will appear on your tax forms that don't appear during other tax years.

  • So by that logic, assuming that the property is not rented during 2019, in April 2020 I will have to fill out a schedule E in which I say the property was rented for 0 days but then claim a full year of property taxes?? – Reluctant Landlord Mar 10 at 16:22
  • (That previous comment is not to suggest you are wrong, I'm just a bit worried that filling out a schedule E in future years with 0 income for 0 days of rental with a large property tax expense looks dodgy. But I guess the IRS knows how property taxes work in Illinois.) – Reluctant Landlord Mar 10 at 16:43
  • If you sell the property, at settlement you will address the tax situation and you can use that payment you make at settlement on the next tax form. – mhoran_psprep Mar 10 at 17:44
  • I'm now living in the property again and will for the entire year, so I will just be in the position of filling out a schedule E next year (for 2019) consisting only of a large tax expense and nothing else. – Reluctant Landlord Mar 10 at 17:49

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