There's a popular myth about a trespasser who pays delinquent taxes on someone else's property and then becomes the owner. If you're a property owner, it's a scary myth, and if you're attracted to the idea of getting something for nothing, it's appealing. But it's largely just a myth. The reality is substantially different.
Paying Back Taxes on Others' Property
You can always pay someone else's property taxes, whether they're back taxes or current. There's no law against it, and some homeowners might encourage it because, except in the most unusual circumstances, there's no benefit to you for paying them. They're not even deductible expenses because, at the time you pay them, you're not – and may never be – the owner, and only the owner can claim a tax payment as an expense. This is where the concept of property tax ownership is a myth, since it takes more than paying taxes to make property ownership legal.
Most states have a law, usually identified as "the law of adverse possession," giving someone the right to pay taxes on tax-delinquent property and, eventually, become the legal owner. The qualifying requirements, however, are exacting and often misunderstood. First, the taxes must be delinquent and, if you're the person trying to make the claim, you must be the only person paying them. If the owner pays the property tax even once before you've perfected your claim, the payment puts your living rights to property in doubt. For this reason, if you're the legal owner, it's always a good idea to keep your tax records for seven years, in case you need to show a judge you've paid them.
You can't just move onto unoccupied property and assume title. In most states, as in Florida, you have to file a legitimate title claim or, under adverse possession, continuously occupy the property – the statutory period in Florida is seven years – and be able to show that you've improved the property during your occupancy. The more mundane reality of adverse possession claims is that they usually have to do with a fence or the side of someone's garage being over the property line. If unopposed, after a certain number of years, the trespass can become a right, and the garage or the fence can stay where it is. But this does not give that person living rights to a home.
Exceptions by State
Each state has its own requirements when it comes to paying someone else's property taxes. The California law requires that to take ownership of a property, the person occupying it must do so openly, alone and continuously for five years without objection from the owner. Trips to the grocery store are undoubtedly fine, but a long vacation will likely restart the five-year clock. Other states have slightly different requirements, but all specify long periods of unopposed, open and continuous occupancy. In Texas, for example, occupancy for purposes of adverse possession must extend a minimum of five years, and under some circumstances, requires 10 years of continuous occupancy.
SALT Deductions and 2018 Taxes
You can claim the property taxes you paid in the 2018 tax year on your federal income taxes, but there is a limit. The Tax Cuts and Jobs Act puts a cap on the amount that you can take in state and local taxes, known as the SALT deduction, to $10,000 in total. It's also important to note that the standard deduction has been increased to $12,000 per person for the 2018 tax year, which means that you may find that you don't have enough itemized deductions to exceed that, making it unnecessary to track and claim any state and local taxes you paid.
Claiming Property Payments on 2017 Taxes
If you're filing your 2017 federal income taxes, you can claim your state and local taxes, including any property taxes you paid during the tax year, without the limits you'll face starting in 2018.
I am a retired Registered Investment Advisor with 12 years experience as head of an investment management firm. I also have a Ph.D. in English and have written more than 4,000 articles for regional and national publications.