Real Estate Taxes are generally divided so that you and the
seller each pay real estate taxes for the part of the tax year that
you owned the home.  Your share of these real estate taxes is
fully deductible when you itemize your deductions. 


Division of Real Estate Taxes
For federal income tax purposes, the seller is treated as paying the
property taxes up to the date of the sale.  As the buyer, you are
treated as paying taxes beginning with the date of sale.  This rule
applies regardless of who pays the tax.  

If the seller has already paid the annual property taxes, the buyer
typically reimburses the seller for the period in which the buyer will
be occupying the property.  Likewise, if the taxes have not been paid,
the seller typically reimburses as the buyer for the period in which the
buyer occupied the property.

Buyer's and Seller's Share of Real Estate Taxes
When you purchase a home you need to be sure that you
get your share of the real estate tax deduction.  At the same
time you need to make sure the seller gets charged for their proper
share of the year's real estate taxes as well.  If you don't do this you
may end up having to pay part of the seller's real estate tax.  To
make matters worse, you can't deduct your payment for the sellers
share of the tax burden!!!

The settlement statement you get at closing generally controls how
the real estate taxes are apportioned between the seller and
buyer.  The statement should clearly state how the real estate
taxes for the year are prorated between the two parties.  As stated
above, the seller should be charged with the amount of tax from the
beginning of the real property tax year to the date of closing.  The
buyer should be charged with the balance of the tax to the end of
the real property tax year.  Thus, each party is responsible for their
share of the real estate tax during the real property tax year. 

IRS Guidelines are Strict
If the real estate taxes for the real property tax year have not been
paid on the date that the sale of the home is closed and if the
contract doesn't specify for prorating at closing, the buyer will have
to pay the real estate taxes in full.  It doesn't matter that the seller
owned the property for part of the real property tax year.  It gets
worse; the seller can deduct the share of real estate taxes
that the buyer paid.  The IRS guidelines are strict.  The buyer
can deduct only their share of the property tax, not the entire
amount they paid.  One thing to note in the scenarios above is
that the buyer can add those taxes to their cost basis in the home
if the seller doesn't reimburse them for their share of the tax burden.

See an example of prorated real estate taxes.

Delinquent Real Estate Taxes
If part of your purchase has to do with delinquent taxes, as the
saying goes, buyer beware.  Delinquent taxes are unpaid taxes
that were imposed on the seller for an earlier tax year.  If you agree
to pay delinquent taxes when you purchase your home, you
cannot deduct them.  The delinquent taxes are treated as part of
the cost of your home and added to the cost basis.

See examples of adjusting the cost basis of your home.

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