When To Pay Property Taxes, Before/after 12/31

Hello, just got 2 properties this year, buy/fix/rent. non-escrowed taxes/insurance/hoa. Does it matter when I pay these? I paid $12k in personal income tax from my "job" I want a damn refund. So will these fee's help me reduce my tax burden this year? I have never filed since acquiring these houses, so I have not seen it all play out with exactly what expenses are deductions and what are "capital investment" etc. I know a new roof is capital invest, but "roof repair" is maint expense, stuff like that, but related to property taxes, mud taxes, school taxes, hoa dues, etc. will they help me if I pay them before 12/31? If not, I will just wait until closer to when they are due 1/31...
thanks, Scott

[ Edited by scottgray on Date 12/24/2007 ]

Property taxes are an expense.

Chris

My CPA told me to pay any property taxes before year end if the property is in my personal name.

He also said to just list the taxes on properties that are in a Corporate name and he will accrue the taxes and I'll also get the deduction as if I paid them.

Since I'm a buy/fix/sell guy, I don't have the answer for your question concerning expense vs contributions to capital in a rental situation. [addsig]

As a general rule, defer income and accelerate expenses. If you can pay an expense this year, you usually fair better with your taxes than if you pay next year.

As a general rule, any rehab/repair costs that you incurred to make the property ready to rent are capital expenses that are added to your cost basis and recovered through depreciattion. Download the IRS publication on Depreciation from the IRS web site.

From your question, I assume that your property taxes are assessed in arrears. That is you are being billed at the end of the year for the 2007 property taxes.

Since you purchased these properties this year, you need to look at your settlement statement to see how much credit you were given by the seller for property taxes. If you purchased in July, the seller has already paid half of the property tax bill in the form of a settlement credit against your closing costs.

Yes you will have to pay the full tax bill, but the amount you can expense against your rental income must be reduced by the amount you were credited at settlement.

Check the IRS web site and downloan the publicaction that deals with Rental Property Income and Expenses. This publication coupled with the Depreciation publication will address all your tax questions related to your rental property.

Wow, I love this site, all good info.
Clearly I need to just go ahead and pay the fees/taxes this year and get with a CPA asap in '08. I am in the middle of leasing out my current house and moving out of state. Once that is complete I will find a good CPA locally who can help me with '08 planning. Once I move I will have a total of 3 properties to just manage, without any major rehabs, so it should be pretty simple. But this was my first year, I was just not sure what to do.
I am going to try to cheat at monopoly and get a red hotel after just 3 green houses...
thanks again, and Merry Christmas to all.
Scott


[ Edited by scottgray on Date 12/25/2007 ]

Check with your state, Ours (WA) does not allow "pre-pay' on property taxes, according to my discussion last year with the local assessor.

It would be a good idea, if you have a year needing / qualifying for extra deductions.

I don't believe these would be considered "pre-pay" they are due now, but not late until after 01/31/08....I have invoices for all of the various authorities we have to deal with in the Houston area.
Scott

One of my mortgage servicing companies- I think it was Countrywide, or possibly GMAC- sent me a letter asking if I would prefer the escrow money to be used to pay the taxes before the end of the year or if I would rather they wait until they are due. So it appears that here in Michigan at least you have a choice.

Chris