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Free efile Publication 947 - Introductory Material Table of Contents What's New Practitioners' Hotline IntroductionOrdering forms and publications. Free efile Tax questions. Free efile Useful Items - You may want to see: What's New Registered tax return preparers. Free efile  Registered tax return preparers may prepare and sign as the preparer tax returns and claims for refund and other documents for submission to the IRS. Free efile They may also represent taxpayers before revenue agents, customer service representatives, and similar IRS employees during an examination if they signed the return or claim for refund for the tax year or period under examination. Free efile Future developments. Free efile  The IRS has created a page on IRS. Free efile gov for information about Publication 947 at www. Free efile irs. Free efile gov/pub947. Free efile Information about any future developments (such as legislation enacted after we release it) will be posted on that page. Free efile Practitioners' Hotline The Practitioner Priority Service® is a nationwide, toll-free hotline that provides professional support to practitioners with account-related questions. Free efile The toll-free number for this service is 1-866-860-4259. Free efile Introduction This publication discusses who can represent a taxpayer before the IRS and what forms or documents are used to authorize a person to represent a taxpayer. Free efile Usually, attorneys, certified public accountants (CPAs), enrolled agents, enrolled retirement plan agents, and enrolled actuaries can represent taxpayers before the IRS. Free efile Under special circumstances, other individuals, including registered tax return preparers, unenrolled return preparers, and students can represent taxpayers before the IRS. Free efile For details regarding taxpayer representation, see Who Can Practice Before the IRS, later. Free efile Definitions. Free efile   Many of the terms used in this publication, such as “enrolled agent” and “practitioner” are defined in the Glossary at the back of this publication. Free efile Comments and suggestions. Free efile   We welcome your comments about this publication and your suggestions for future editions. Free efile   You can write to us at the following address: Internal Revenue Service Individual Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. Free efile NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free efile Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free efile   You can email us at taxforms@irs. Free efile gov . Free efile Please put “Publications Comment” on the subject line. Free efile You can also send us comments from www. Free efile irs. Free efile gov/formspubs/, select “Comment on Tax Forms and Publications” under “Information About. Free efile ” Ordering forms and publications. Free efile   Visit www. Free efile irs. Free efile gov/formspubs/ to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Free efile Internal Revenue Service 1201 N. Free efile Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free efile   If you have a tax question, check the information available on IRS. Free efile gov or call 1-800-829-1040. Free efile We cannot answer tax questions sent to either of the above addresses. Free efile Useful Items - You may want to see: Publications 1 Your Rights as a Taxpayer 470 Limited Practice Without Enrollment Circular No. Free efile 230 Regulations Governing Practice before the Internal Revenue Service Forms and Instructions 2848 Power of Attorney and Declaration of Representative 8821 Tax Information Authorization Prev  Up  Next   Home   More Online Publications
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Free efile 22. Free efile   Taxes Table of Contents IntroductionIndian tribal government. Free efile Useful Items - You may want to see: Tests To Deduct Any Tax Income TaxesState and Local Income Taxes Foreign Income Taxes General Sales TaxesMotor vehicles. Free efile Real Estate TaxesReal estate taxes for prior years. Free efile Examples. Free efile Form 1099-S. Free efile Real Estate-Related Items You Cannot Deduct Personal Property Taxes Taxes and Fees You Cannot Deduct Where To Deduct Introduction This chapter discusses which taxes you can deduct if you itemize deductions on Schedule A (Form 1040). Free efile It also explains which taxes you can deduct on other schedules or forms and which taxes you cannot deduct. Free efile This chapter covers the following topics. Free efile Income taxes (federal, state, local, and foreign). Free efile General sales taxes (state and local). Free efile Real estate taxes (state, local, and foreign). Free efile Personal property taxes (state and local). Free efile Taxes and fees you cannot deduct. Free efile Use Table 22-1 as a guide to determine which taxes you can deduct. Free efile The end of the chapter contains a section that explains which forms you use to deduct different types of taxes. Free efile Business taxes. Free efile   You can deduct certain taxes only if they are ordinary and necessary expenses of your trade or business or of producing income. Free efile For information on these taxes, see Publication 535, Business Expenses. Free efile State or local taxes. Free efile   These are taxes imposed by the 50 states, U. Free efile S. Free efile possessions, or any of their political subdivisions (such as a county or city), or by the District of Columbia. Free efile Indian tribal government. Free efile   An Indian tribal government recognized by the Secretary of the Treasury as performing substantial government functions will be treated as a state for purposes of claiming a deduction for taxes. Free efile Income taxes, real estate taxes, and personal property taxes imposed by that Indian tribal government (or by any of its subdivisions that are treated as political subdivisions of a state) are deductible. Free efile General sales taxes. Free efile   These are taxes imposed at one rate on retail sales of a broad range of classes of items. Free efile Foreign taxes. Free efile   These are taxes imposed by a foreign country or any of its political subdivisions. Free efile Useful Items - You may want to see: Publication 514 Foreign Tax Credit for Individuals 530 Tax Information for Homeowners Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule E (Form 1040) Supplemental Income and Loss 1116 Foreign Tax Credit Tests To Deduct Any Tax The following two tests must be met for you to deduct any tax. Free efile The tax must be imposed on you. Free efile You must pay the tax during your tax year. Free efile The tax must be imposed on you. Free efile   In general, you can deduct only taxes imposed on you. Free efile   Generally, you can deduct property taxes only if you are an owner of the property. Free efile If your spouse owns the property and pays the real estate taxes, the taxes are deductible on your spouse's separate return or on your joint return. Free efile You must pay the tax during your tax year. Free efile   If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during your tax year. Free efile If you pay your taxes by check, the day you mail or deliver the check is the date of payment, provided the check is honored by the financial institution. Free efile If you use a pay-by-phone account (such as a credit card or electronic funds withdrawal), the date reported on the statement of the financial institution showing when payment was made is the date of payment. Free efile If you contest a tax liability and are a cash basis taxpayer, you can deduct the tax only in the year you actually pay it (or transfer money or other property to provide for satisfaction of the contested liability). Free efile See Publication 538, Accounting Periods and Methods, for details. Free efile    If you use an accrual method of accounting, see Publication 538 for more information. Free efile Income Taxes This section discusses the deductibility of state and local income taxes (including employee contributions to state benefit funds) and foreign income taxes. Free efile State and Local Income Taxes You can deduct state and local income taxes. Free efile However, you can elect to deduct state and local general sales taxes instead of state and local income taxes. Free efile See General Sales Taxes , later. Free efile Exception. Free efile    You cannot deduct state and local income taxes you pay on income that is exempt from federal income tax, unless the exempt income is interest income. Free efile For example, you cannot deduct the part of a state's income tax that is on a cost-of-living allowance exempt from federal income tax. Free efile What To Deduct Your deduction may be for withheld taxes, estimated tax payments, or other tax payments as follows. Free efile Withheld taxes. Free efile   You can deduct state and local income taxes withheld from your salary in the year they are withheld. Free efile Your Form(s) W-2 will show these amounts. Free efile Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld. Free efile Estimated tax payments. Free efile   You can deduct estimated tax payments you made during the year to a state or local government. Free efile However, you must have a reasonable basis for making the estimated tax payments. Free efile Any estimated state or local tax payments that are not made in good faith at the time of payment are not deductible. Free efile For example, you made an estimated state income tax payment. Free efile However, the estimate of your state tax liability shows that you will get a refund of the full amount of your estimated payment. Free efile You had no reasonable basis to believe you had any additional liability for state income taxes and you cannot deduct the estimated tax payment. Free efile Refund applied to taxes. Free efile   You can deduct any part of a refund of prior-year state or local income taxes that you chose to have credited to your 2013 estimated state or local income taxes. Free efile    Do not reduce your deduction by either of the following items. Free efile Any state or local income tax refund (or credit) you expect to receive for 2013. Free efile Any refund of (or credit for) prior-year state and local income taxes you actually received in 2013. Free efile   However, part or all of this refund (or credit) may be taxable. Free efile See Refund (or credit) of state or local income taxes , later. Free efile Separate federal returns. Free efile   If you and your spouse file separate state, local, and federal income tax returns, you each can deduct on your federal return only the amount of your own state and local income tax that you paid during the tax year. Free efile Joint state and local returns. Free efile   If you and your spouse file joint state and local returns and separate federal returns, each of you can deduct on your separate federal return a part of the total state and local income taxes paid during the tax year. Free efile You can deduct only the amount of the total taxes that is proportionate to your gross income compared to the combined gross income of you and your spouse. Free efile However, you cannot deduct more than the amount you actually paid during the year. Free efile You can avoid this calculation if you and your spouse are jointly and individually liable for the full amount of the state and local income taxes. Free efile If so, you and your spouse can deduct on your separate federal returns the amount you each actually paid. Free efile Joint federal return. Free efile   If you file a joint federal return, you can deduct the total of the state and local income taxes both of you paid. Free efile Contributions to state benefit funds. Free efile    As an employee, you can deduct mandatory contributions to state benefit funds withheld from your wages that provide protection against loss of wages. Free efile For example, certain states require employees to make contributions to state funds providing disability or unemployment insurance benefits. Free efile Mandatory payments made to the following state benefit funds are deductible as state income taxes on Schedule A (Form 1040), line 5. Free efile Alaska Unemployment Compensation Fund. Free efile California Nonoccupational Disability Benefit Fund. Free efile New Jersey Nonoccupational Disability Benefit Fund. Free efile New Jersey Unemployment Compensation Fund. Free efile New York Nonoccupational Disability Benefit Fund. Free efile Pennsylvania Unemployment Compensation Fund. Free efile Rhode Island Temporary Disability Benefit Fund. Free efile Washington State Supplemental Workmen's Compensation Fund. Free efile    Employee contributions to private or voluntary disability plans are not deductible. Free efile Refund (or credit) of state or local income taxes. Free efile   If you receive a refund of (or credit for) state or local income taxes in a year after the year in which you paid them, you may have to include the refund in income on Form 1040, line 10, in the year you receive it. Free efile This includes refunds resulting from taxes that were overwithheld, applied from a prior year return, not figured correctly, or figured again because of an amended return. Free efile If you did not itemize your deductions in the previous year, do not include the refund in income. Free efile If you deducted the taxes in the previous year, include all or part of the refund on Form 1040, line 10, in the year you receive the refund. Free efile For a discussion of how much to include, see Recoveries in chapter 12. Free efile Foreign Income Taxes Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. Free efile S. Free efile possession. Free efile However, you cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Free efile S. Free efile tax under the foreign earned income exclusion or the foreign housing exclusion. Free efile For information on these exclusions, see Publication 54, Tax Guide for U. Free efile S. Free efile Citizens and Resident Aliens Abroad. Free efile For information on the foreign tax credit, see Publication 514. Free efile General Sales Taxes You can elect to deduct state and local general sales taxes, instead of state and local income taxes, as an itemized deduction on Schedule A (Form 1040), line 5b. Free efile You can use either your actual expenses or the state and local sales tax tables to figure your sales tax deduction. Free efile Actual expenses. Free efile   Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) if the tax rate was the same as the general sales tax rate. Free efile However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. Free efile If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. Free efile If you use the actual expenses method, you must have receipts to show the general sales taxes paid. Free efile Do not include sales taxes paid on items used in your trade or business. Free efile Motor vehicles. Free efile   For purposes of this section, motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Free efile This also includes sales taxes on a leased motor vehicle, but not on vehicles used in your trade or business. Free efile Optional sales tax tables. Free efile   Instead of using your actual expenses, you can figure your state and local general sales tax deduction using the state and local sales tax tables in the Instructions for Schedule A (Form 1040). Free efile You may also be able to add the state and local general sales taxes paid on certain specified items. Free efile   Your applicable table amount is based on the state where you live, your income, and the number of exemptions claimed on your tax return. Free efile Your income is your adjusted gross income plus any nontaxable items such as the following. Free efile Tax-exempt interest. Free efile Veterans' benefits. Free efile Nontaxable combat pay. Free efile Workers' compensation. Free efile Nontaxable part of social security and railroad retirement benefits. Free efile Nontaxable part of IRA, pension, or annuity distributions, excluding rollovers. Free efile Public assistance payments. Free efile If you lived in different states during the same tax year, you must prorate your applicable table amount for each state based on the days you lived in each state. Free efile See the Instructions for Schedule A (Form 1040), line 5, for details. Free efile Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real property levied for the general public welfare. Free efile You can deduct these taxes only if they are based on the assessed value of the real property and charged uniformly against all property under the jurisdiction of the taxing authority. Free efile Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Free efile They also do not include itemized charges for services (such as trash collection) assessed against specific property or certain people, even if the charge is paid to the taxing authority. Free efile For more information about taxes and charges that are not deductible, see Real Estate-Related Items You Cannot Deduct , later. Free efile Tenant-shareholders in a cooperative housing corporation. Free efile   Generally, if you are a tenant-stockholder in a cooperative housing corporation, you can deduct the amount paid to the corporation that represents your share of the real estate taxes the corporation paid or incurred for your dwelling unit. Free efile The corporation should provide you with a statement showing your share of the taxes. Free efile For more information, see Special Rules for Cooperatives in Publication 530. Free efile Division of real estate taxes between buyers and sellers. Free efile   If you bought or sold real estate during the year, the real estate taxes must be divided between the buyer and the seller. Free efile   The buyer and the seller must divide the real estate taxes according to the number of days in the real property tax year (the period to which the tax is imposed relates) that each owned the property. Free efile The seller is treated as paying the taxes up to, but not including, the date of sale. Free efile The buyer is treated as paying the taxes beginning with the date of sale. Free efile This applies regardless of the lien dates under local law. Free efile Generally, this information is included on the settlement statement provided at the closing. Free efile    If you (the seller) cannot deduct taxes until they are paid because you use the cash method of accounting, and the buyer of your property is personally liable for the tax, you are considered to have paid your part of the tax at the time of the sale. Free efile This lets you deduct the part of the tax to the date of sale even though you did not actually pay it. Free efile However, you must also include the amount of that tax in the selling price of the property. Free efile The buyer must include the same amount in his or her cost of the property. Free efile   You figure your deduction for taxes on each property bought or sold during the real property tax year as follows. Free efile Worksheet 22-1. Free efile Figuring Your Real Estate Tax Deduction 1. Free efile Enter the total real estate taxes for the real property tax year   2. Free efile Enter the number of days in the real property tax year that you owned the property   3. Free efile Divide line 2 by 365 (for leap years, divide line 2 by 366) . Free efile 4. Free efile Multiply line 1 by line 3. Free efile This is your deduction. Free efile Enter it on Schedule A (Form 1040), line 6   Note. Free efile Repeat steps 1 through 4 for each property you bought or sold during the real property tax year. Free efile Your total deduction is the sum of the line 4 amounts for all of the properties. Free efile Real estate taxes for prior years. Free efile   Do not divide delinquent taxes between the buyer and seller if the taxes are for any real property tax year before the one in which the property is sold. Free efile Even if the buyer agrees to pay the delinquent taxes, the buyer cannot deduct them. Free efile The buyer must add them to the cost of the property. Free efile The seller can deduct these taxes paid by the buyer. Free efile However, the seller must include them in the selling price. Free efile Examples. Free efile   The following examples illustrate how real estate taxes are divided between buyer and seller. Free efile Example 1. Free efile Dennis and Beth White's real property tax year for both their old home and their new home is the calendar year, with payment due August 1. Free efile The tax on their old home, sold on May 7, was $620. Free efile The tax on their new home, bought on May 3, was $732. Free efile Dennis and Beth are considered to have paid a proportionate share of the real estate taxes on the old home even though they did not actually pay them to the taxing authority. Free efile On the other hand, they can claim only a proportionate share of the taxes they paid on their new property even though they paid the entire amount. Free efile Dennis and Beth owned their old home during the real property tax year for 126 days (January 1 to May 6, the day before the sale). Free efile They figure their deduction for taxes on their old home as follows. Free efile Worksheet 22-1. Free efile Figuring Your Real Estate Tax Deduction — Taxes on Old Home 1. Free efile Enter the total real estate taxes for the real property tax year $620 2. Free efile Enter the number of days in the real property tax year that you owned the property 126 3. Free efile Divide line 2 by 365 (for leap years, divide line 2 by 366) . Free efile 3452 4. Free efile Multiply line 1 by line 3. Free efile This is your deduction. Free efile Enter it on Schedule A (Form 1040), line 6 $214 Since the buyers of their old home paid all of the taxes, Dennis and Beth also include the $214 in the selling price of the old home. Free efile (The buyers add the $214 to their cost of the home. Free efile ) Dennis and Beth owned their new home during the real property tax year for 243 days (May 3 to December 31, including their date of purchase). Free efile They figure their deduction for taxes on their new home as follows. Free efile Worksheet 22-1. Free efile Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Free efile Enter the total real estate taxes for the real property tax year $732 2. Free efile Enter the number of days in the real property tax year that you owned the property 243 3. Free efile Divide line 2 by 365 (for leap years, divide line 2 by 366) . Free efile 6658 4. Free efile Multiply line 1 by line 3. Free efile This is your deduction. Free efile Enter it on Schedule A (Form 1040), line 6 $487 Since Dennis and Beth paid all of the taxes on the new home, they add $245 ($732 paid less $487 deduction) to their cost of the new home. Free efile (The sellers add this $245 to their selling price and deduct the $245 as a real estate tax. Free efile ) Dennis and Beth's real estate tax deduction for their old and new homes is the sum of $214 and $487, or $701. Free efile They will enter this amount on Schedule A (Form 1040), line 6. Free efile Example 2. Free efile George and Helen Brown bought a new home on May 3, 2013. Free efile Their real property tax year for the new home is the calendar year. Free efile Real estate taxes for 2012 were assessed in their state on January 1, 2013. Free efile The taxes became due on May 31, 2013, and October 31, 2013. Free efile The Browns agreed to pay all taxes due after the date of purchase. Free efile Real estate taxes for 2012 were $680. Free efile They paid $340 on May 31, 2013, and $340 on October 31, 2013. Free efile These taxes were for the 2012 real property tax year. Free efile The Browns cannot deduct them since they did not own the property until 2013. Free efile Instead, they must add $680 to the cost of their new home. Free efile In January 2014, the Browns receive their 2013 property tax statement for $752, which they will pay in 2014. Free efile The Browns owned their new home during the 2013 real property tax year for 243 days (May 3 to December 31). Free efile They will figure their 2014 deduction for taxes as follows. Free efile Worksheet 22-1. Free efile Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Free efile Enter the total real estate taxes for the real property tax year $752 2. Free efile Enter the number of days in the real property tax year that you owned the property 243 3. Free efile Divide line 2 by 365 (for leap years, divide line 2 by 366) . Free efile 6658 4. Free efile Multiply line 1 by line 3. Free efile This is your deduction. Free efile Claim it on Schedule A (Form 1040), line 6 $501 The remaining $251 ($752 paid less $501 deduction) of taxes paid in 2014, along with the $680 paid in 2013, is added to the cost of their new home. Free efile Because the taxes up to the date of sale are considered paid by the seller on the date of sale, the seller is entitled to a 2013 tax deduction of $931. Free efile This is the sum of the $680 for 2012 and the $251 for the 122 days the seller owned the home in 2013. Free efile The seller must also include the $931 in the selling price when he or she figures the gain or loss on the sale. Free efile The seller should contact the Browns in January 2014 to find out how much real estate tax is due for 2013. Free efile Form 1099-S. Free efile   For certain sales or exchanges of real estate, the person responsible for closing the sale (generally the settlement agent) prepares Form 1099-S, Proceeds From Real Estate Transactions, to report certain information to the IRS and to the seller of the property. Free efile Box 2 of Form 1099-S is for the gross proceeds from the sale and should include the portion of the seller's real estate tax liability that the buyer will pay after the date of sale. Free efile The buyer includes these taxes in the cost basis of the property, and the seller both deducts this amount as a tax paid and includes it in the sales price of the property. Free efile   For a real estate transaction that involves a home, any real estate tax the seller paid in advance but that is the liability of the buyer appears on Form 1099-S, box 5. Free efile The buyer deducts this amount as a real estate tax, and the seller reduces his or her real estate tax deduction (or includes it in income) by the same amount. Free efile See Refund (or rebate) , later. Free efile Taxes placed in escrow. Free efile   If your monthly mortgage payment includes an amount placed in escrow (put in the care of a third party) for real estate taxes, you may not be able to deduct the total amount placed in escrow. Free efile You can deduct only the real estate tax that the third party actually paid to the taxing authority. Free efile If the third party does not notify you of the amount of real estate tax that was paid for you, contact the third party or the taxing authority to find the proper amount to show on your return. Free efile Tenants by the entirety. Free efile   If you and your spouse held property as tenants by the entirety and you file separate federal returns, each of you can deduct only the taxes each of you paid on the property. Free efile Divorced individuals. Free efile   If your divorce or separation agreement states that you must pay the real estate taxes for a home owned by you and your spouse, part of your payments may be deductible as alimony and part as real estate taxes. Free efile See Taxes and insurance in chapter 18 for more information. Free efile Ministers' and military housing allowances. Free efile   If you are a minister or a member of the uniformed services and receive a housing allowance that you can exclude from income, you still can deduct all of the real estate taxes you pay on your home. Free efile Refund (or rebate). Free efile   If you received a refund or rebate in 2013 of real estate taxes you paid in 2013, you must reduce your deduction by the amount refunded to you. Free efile If you received a refund or rebate in 2013 of real estate taxes you deducted in an earlier year (either as an itemized deduction or an increase to your standard deduction), you generally must include the refund or rebate in income in the year you receive it. Free efile However, the amount you include in income is limited to the amount of the deduction that reduced your tax in the earlier year. Free efile For more information, see Recoveries in chapter 12. Free efile Table 22-1. Free efile Which Taxes Can You Deduct? Type of Tax You Can Deduct You Cannot Deduct Fees and Charges Fees and charges that are expenses of your trade or business or of producing income. Free efile Fees and charges that are not expenses of your trade or business or of producing income, such as fees for driver's licenses, car inspections, parking, or charges for water bills (see Taxes and Fees You Cannot Deduct ). Free efile     Fines and penalties. Free efile Income Taxes State and local income taxes. Free efile Federal income taxes. Free efile   Foreign income taxes. Free efile     Employee contributions to state funds listed under Contributions to state benefit funds . Free efile Employee contributions to private or voluntary disability plans. Free efile     State and local general sales taxes if you choose to deduct state and local income taxes. Free efile General Sales Taxes State and local general sales taxes, including compensating use taxes. Free efile State and local income taxes if you choose to deduct state and local general sales taxes. Free efile Other Taxes Taxes that are expenses of your trade or business. Free efile Federal excise taxes, such as tax on gasoline, that are not expenses of your trade or business or of producing income. Free efile   Taxes on property producing rent or royalty income. Free efile Per capita taxes. Free efile   Occupational taxes. Free efile See chapter 28. Free efile     One-half of self-employment tax paid. Free efile   Personal Property Taxes State and local personal property taxes. Free efile Customs duties that are not expenses of your trade or business or of producing income. Free efile Real Estate Taxes State and local real estate taxes. Free efile Real estate taxes that are treated as imposed on someone else (see Division of real estate taxes between buyers and sellers ). Free efile   Foreign real estate taxes. Free efile Taxes for local benefits (with exceptions). Free efile See Real Estate-Related Items You Cannot Deduct . Free efile   Tenant's share of real estate taxes paid by  cooperative housing corporation. Free efile Trash and garbage pickup fees (with exceptions). Free efile See Real Estate-Related Items You Cannot Deduct . Free efile     Rent increase due to higher real estate taxes. Free efile     Homeowners' association charges. Free efile Real Estate-Related Items You Cannot Deduct Payments for the following items generally are not deductible as real estate taxes. Free efile Taxes for local benefits. Free efile Itemized charges for services (such as trash and garbage pickup fees). Free efile Transfer taxes (or stamp taxes). Free efile Rent increases due to higher real estate taxes. Free efile Homeowners' association charges. Free efile Taxes for local benefits. Free efile   Deductible real estate taxes generally do not include taxes charged for local benefits and improvements tending to increase the value of your property. Free efile These include assessments for streets, sidewalks, water mains, sewer lines, public parking facilities, and similar improvements. Free efile You should increase the basis of your property by the amount of the assessment. Free efile   Local benefit taxes are deductible only if they are for maintenance, repair, or interest charges related to those benefits. Free efile If only a part of the taxes is for maintenance, repair, or interest, you must be able to show the amount of that part to claim the deduction. Free efile If you cannot determine what part of the tax is for maintenance, repair, or interest, none of it is deductible. Free efile    Taxes for local benefits may be included in your real estate tax bill. Free efile If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Free efile You should use the rules above to determine if the local benefit tax is deductible. Free efile Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Free efile Itemized charges for services. Free efile    An itemized charge for services assessed against specific property or certain people is not a tax, even if the charge is paid to the taxing authority. Free efile For example, you cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged to each homeowner for trash collection), or A flat fee charged for a single service provided by your government (such as a $30 charge for mowing your lawn because it was allowed to grow higher than permitted under your local ordinance). Free efile    You must look at your real estate tax bill to determine if any nondeductible itemized charges, such as those listed above, are included in the bill. Free efile If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Free efile Exception. Free efile   Service charges used to maintain or improve services (such as trash collection or police and fire protection) are deductible as real estate taxes if: The fees or charges are imposed at a like rate against all property in the taxing jurisdiction, The funds collected are not earmarked; instead, they are commingled with general revenue funds, and Funds used to maintain or improve services are not limited to or determined by the amount of these fees or charges collected. Free efile Transfer taxes (or stamp taxes). Free efile   Transfer taxes and similar taxes and charges on the sale of a personal home are not deductible. Free efile If they are paid by the seller, they are expenses of the sale and reduce the amount realized on the sale. Free efile If paid by the buyer, they are included in the cost basis of the property. Free efile Rent increase due to higher real estate taxes. Free efile   If your landlord increases your rent in the form of a tax surcharge because of increased real estate taxes, you cannot deduct the increase as taxes. Free efile Homeowners' association charges. Free efile   These charges are not deductible because they are imposed by the homeowners' association, rather than the state or local government. Free efile Personal Property Taxes Personal property tax is deductible if it is a state or local tax that is: Charged on personal property, Based only on the value of the personal property, and Charged on a yearly basis, even if it is collected more or less than once a year. Free efile A tax that meets the above requirements can be considered charged on personal property even if it is for the exercise of a privilege. Free efile For example, a yearly tax based on value qualifies as a personal property tax even if it is called a registration fee and is for the privilege of registering motor vehicles or using them on the highways. Free efile If the tax is partly based on value and partly based on other criteria, it may qualify in part. Free efile Example. Free efile Your state charges a yearly motor vehicle registration tax of 1% of value plus 50 cents per hundredweight. Free efile You paid $32 based on the value ($1,500) and weight (3,400 lbs. Free efile ) of your car. Free efile You can deduct $15 (1% × $1,500) as a personal property tax because it is based on the value. Free efile The remaining $17 ($. Free efile 50 × 34), based on the weight, is not deductible. Free efile Taxes and Fees You Cannot Deduct Many federal, state, and local government taxes are not deductible because they do not fall within the categories discussed earlier. Free efile Other taxes and fees, such as federal income taxes, are not deductible because the tax law specifically prohibits a deduction for them. Free efile See Table 22-1. Free efile Taxes and fees that are generally not deductible include the following items. Free efile Employment taxes. Free efile This includes social security, Medicare, and railroad retirement taxes withheld from your pay. Free efile However, one-half of self-employment tax you pay is deductible. Free efile In addition, the social security and other employment taxes you pay on the wages of a household worker may be included in medical expenses that you can deduct or child care expenses that allow you to claim the child and dependent care credit. Free efile For more information, see chapters 21 and 32. Free efile Estate, inheritance, legacy, or succession taxes. Free efile However, you can deduct the estate tax attributable to income in respect of a decedent if you, as a beneficiary, must include that income in your gross income. Free efile In that case, deduct the estate tax as a miscellaneous deduction that is not subject to the 2%-of-adjusted-gross-income limit. Free efile For more information, see Publication 559, Survivors, Executors, and Administrators. Free efile Federal income taxes. Free efile This includes income taxes withheld from your pay. Free efile Fines and penalties. Free efile You cannot deduct fines and penalties paid to a government for violation of any law, including related amounts forfeited as collateral deposits. Free efile Gift taxes. Free efile License fees. Free efile You cannot deduct license fees for personal purposes (such as marriage, driver's, and dog license fees). Free efile Per capita taxes. Free efile You cannot deduct state or local per capita taxes. Free efile Many taxes and fees other than those listed above are also nondeductible, unless they are ordinary and necessary expenses of a business or income producing activity. Free efile For other nondeductible items, see Real Estate-Related Items You Cannot Deduct , earlier. Free efile Where To Deduct You deduct taxes on the following schedules. Free efile State and local income taxes. Free efile    These taxes are deducted on Schedule A (Form 1040), line 5, even if your only source of income is from business, rents, or royalties. Free efile Check box a on line 5. Free efile General sales taxes. Free efile   Sales taxes are deducted on Schedule A (Form 1040), line 5. Free efile You must check box b on line 5. Free efile If you elect to deduct sales taxes, you cannot deduct state and local income taxes on Schedule A (Form 1040), line 5, box a. Free efile Foreign income taxes. Free efile   Generally, income taxes you pay to a foreign country or U. Free efile S. Free efile possession can be claimed as an itemized deduction on Schedule A (Form 1040), line 8, or as a credit against your U. Free efile S. Free efile income tax on Form 1040, line 47. Free efile To claim the credit, you may have to complete and attach Form 1116. Free efile For more information, see chapter 37, the Form 1040 instructions, or Publication 514. Free efile Real estate taxes and personal property taxes. Free efile    Real estate and personal property taxes are deducted on Schedule A (Form 1040), lines 6 and 7, respectively, unless they are paid on property used in your business, in which case they are deducted on Schedule C, Schedule C-EZ, or Schedule F (Form 1040). Free efile Taxes on property that produces rent or royalty income are deducted on Schedule E (Form 1040). Free efile Self-employment tax. Free efile    Deduct one-half of your self-employment tax on Form 1040, line 27. Free efile Other taxes. Free efile    All other deductible taxes are deducted on Schedule A (Form 1040), line 8. Free efile Prev  Up  Next   Home   More Online Publications