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This is my first tax season as a home owner. I know that we have our taxes and homeowners insurance in escrow, but I was wondering if the bank automatically takes pays these taxes or will I receive a bill first? Does your escrow usually include school taxes?

PS I live in NY state if it makes a difference.

7 Thoughts on Tax escrow questions?
  1. Reply
    Charles G
    August 24, 2011 at 11:56 pm

    I don’t know if this is 100% for every case, but usually the bank pays the property tax and insurance if it takes them out in escrow. When you receive your 1098, those amounts will be listed, along with mortgage interest you paid.

  2. Reply
    August 25, 2011 at 12:05 am

    If everything went smoothly at your closing, the tax property tax bill should go to your lender and they should pay it from your escrow. If somehow you receive the property tax bill instead forward that to the department that pays real estate taxes at your lender. I wouldn’t know about city taxes because we don’t have those in my state (just sales taxes and most cities have city vehicle stickers).

    If your county has a website (treasurer or assessor) it is a good idea to keep tabs on that to make sure your taxes have been paid when due. Both the title company and lender missed paying for half of my double lot (even though everything on all loan papers) which I did not find out about until I got notice of tax sale, and then had to scramble to get it paid.

    I have never had insurance escrow, but if you change insurance companies, you have to make sure that you forward that info to your lender, and tell the old company in writing that you are cancelling. I heard of someone paying 2 insurance companies for years without realizing it because they neglected to cancel one.

    Note that deductions for real estate taxes are only deductiable when you are responsible and they are actually paid (not when paid into escrow). So if you got any credit from previous owner for tax through closing not due yet then, you can only deduct the amount of tax paid after that was used up.

  3. Reply
    Bob F
    August 25, 2011 at 12:52 am

    The bank is SUPPOSED to pay those automatically for you. But since this is a new escrow account, I would verify with both the county or local taxing authority and the insurance company that they got the money on time. Otherwise you want to raise heck with your mortgage holder to find out why so it doesn’t keep happening. After all, you don’t want your taxes paid late or your insurance paid late and not be covered for the meanwhile.

  4. Reply
    August 25, 2011 at 1:41 am

    In my state, California, the bill goes to the mortgage holder but the homeowner gets a courtesy copy

  5. Reply
    Clark Kent
    August 25, 2011 at 2:14 am

    An escrow account will include all taxes as well as insurance on your house.
    The bank will pay the taxes and insurance and will probably get the bill before you get your statement. You may get a statement from the tax collector, but it is not a bill since the bank pays it.

    On your tax return you deduct whatever the bank paid the tax collectors, not what you paid into escrow.

    You should get a form 1098 from the bank showing how much interest and taxes you paid, but they are only required to show the interest on this form but they will give you some kind of form showing the taxes.

    The tax is deductible in the year they pay it. If they wait until January, you won’t be able to deduct it on this year’s return.

    If they pay the 2009 taxes in January 2009, then pay the 2010 taxes in Dec 2009, you can deduct both payments on your 2009 return (due in 2010).

  6. Reply
    August 25, 2011 at 2:29 am

    Usually the bank will receive and pay the bill. As an income tax preparer I have seen times when the banks have missed paying the taxes and or insurance. Please check with your mortgage holder for verification of payment. A little of your time now will save you many hours of frustration later.

  7. Reply
    August 25, 2011 at 2:33 am

    The escrow would normally include ALL of your real estate taxes, and yes the lender pays them, from the escrow funds you pay into with each payment. If you get a bill, check with the lender to be sure they did too – sometimes the first time goes the wrong place – the lender should be sent a bill from the taxing authority. At the end of the year, you’ll get a statement from your lender showing what they paid out of your escrow account.

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