If you pay real estate taxes owed by the previous owner, what should you do with them?

When you pay real estate taxes that were owed by a previous owner, adding those amounts to your basis in the property is the correct approach. This is because the costs you incur, including taxes, can be factored into the overall investment you have in the property. The basis is essentially what you have invested and can affect your capital gains when you eventually sell the property. By increasing your basis, you are potentially lowering your taxable gain when the property is sold, which can provide tax benefits in the future.

Other choices may seem appealing but do not accurately reflect proper tax treatment in this scenario. Writing off the taxes as an expense would not be appropriate because these payments were made on behalf of another party and do not qualify as personal deductions. Similarly, deducting them in the current year is not suitable because these taxes are technically the responsibility of the previous owner, and claiming them as a deduction could result in issues with tax compliance. Filing a claim for reimbursement does not apply here, as these taxes are already your responsibility as the current owner, not something you can seek reimbursement for from the previous owner. Therefore, adjusting your basis in the property appropriately reflects the reality of your financial position regarding the property.