My mortgage company paid our real estate taxes, but we owe those funds to our escrow account. Can I still deduct them on my income tax return this year?
If the escrow agent paid the taxes from monies you previously paid into the escrow account, then you can deduct them. However, if they paid them for you and is demanding you pay them back, you cannot deduct them. You are a cash basis taxpayer and can only deduct the payments if you made them; you are not an accrual based taxpayer that can deduct amounts that you merely owe.
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You must actually pay the taxes to take the deduction. The bank must have paid the taxes on your behalf because you did not pay them. They were protecting their security interest in the property. If you advance the money or pay them back for these taxes, then you can take the deduction.
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