04 Nov Mom died. How can we deduct property taxes on her house?

Q. My mother, 96, died in July of 2022. Her house remains in her name. While the house is technically titled in her name, I assume that as of the date of her death, it became part of her estate. Property taxes are due soon. If these property taxes are paid out of her estate, where might there be a tax deduction? Would it be her regular 1040, her estate return or her 1041 for the income tax return on her estate?
— Unsure

A. We’re sorry to hear about your mom.

Determining taxes owed after someone dies can be complicated.

Regulations provide that property taxes are not deductible for estate tax purposes unless they accrued before the decedent’s death, said Jason Marx, partner in the Tax, Trusts and Estates and Elder Law practice groups at Mandelbaum Barrett in Roseland.

However, he said, they are not deductible merely because they have accrued in an accounting sense.

“Property taxes, in order to be deductible, must be an enforceable obligation of the decedent at the time of her death,” Marx said. “Practically speaking, the IRS takes the position that expenses of an estate are deductible to the extent they are incurred in connection with the management, conservation or maintenance of property.”

Therefore, the estate should be able to deduct property taxes incurred shortly after the decedent’s death to the extent the taxes were necessarily incurred in connection with one of the aforementioned standards, he said.

Marx said the executor may elect to take the property tax deduction on the estate tax return or on the estate’s fiduciary income tax return, but not on both.

“An estate’s administration expense can be deducted either from the gross estate on the Form 706 or from the estate’s gross income on the Form 1041,” he said. “The estate cannot double deduct, and the fiduciary should consult with his/her tax advisor to determine the best strategy for taking the deduction.”

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This story was originally published on Nov. 4, 2022.

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