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Tax forms ez 22. Tax forms ez   Taxes Table of Contents IntroductionIndian tribal government. Tax forms ez 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. Tax forms ez Real Estate TaxesReal estate taxes for prior years. Tax forms ez Examples. Tax forms ez Form 1099-S. Tax forms ez 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). Tax forms ez It also explains which taxes you can deduct on other schedules or forms and which taxes you cannot deduct. Tax forms ez This chapter covers the following topics. Tax forms ez Income taxes (federal, state, local, and foreign). Tax forms ez General sales taxes (state and local). Tax forms ez Real estate taxes (state, local, and foreign). Tax forms ez Personal property taxes (state and local). Tax forms ez Taxes and fees you cannot deduct. Tax forms ez Use Table 22-1 as a guide to determine which taxes you can deduct. Tax forms ez The end of the chapter contains a section that explains which forms you use to deduct different types of taxes. Tax forms ez Business taxes. Tax forms ez   You can deduct certain taxes only if they are ordinary and necessary expenses of your trade or business or of producing income. Tax forms ez For information on these taxes, see Publication 535, Business Expenses. Tax forms ez State or local taxes. Tax forms ez   These are taxes imposed by the 50 states, U. Tax forms ez S. Tax forms ez possessions, or any of their political subdivisions (such as a county or city), or by the District of Columbia. Tax forms ez Indian tribal government. Tax forms ez   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. Tax forms ez 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. Tax forms ez General sales taxes. Tax forms ez   These are taxes imposed at one rate on retail sales of a broad range of classes of items. Tax forms ez Foreign taxes. Tax forms ez   These are taxes imposed by a foreign country or any of its political subdivisions. Tax forms ez 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. Tax forms ez The tax must be imposed on you. Tax forms ez You must pay the tax during your tax year. Tax forms ez The tax must be imposed on you. Tax forms ez   In general, you can deduct only taxes imposed on you. Tax forms ez   Generally, you can deduct property taxes only if you are an owner of the property. Tax forms ez 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. Tax forms ez You must pay the tax during your tax year. Tax forms ez   If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during your tax year. Tax forms ez 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. Tax forms ez 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. Tax forms ez 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). Tax forms ez See Publication 538, Accounting Periods and Methods, for details. Tax forms ez    If you use an accrual method of accounting, see Publication 538 for more information. Tax forms ez Income Taxes This section discusses the deductibility of state and local income taxes (including employee contributions to state benefit funds) and foreign income taxes. Tax forms ez State and Local Income Taxes You can deduct state and local income taxes. Tax forms ez However, you can elect to deduct state and local general sales taxes instead of state and local income taxes. Tax forms ez See General Sales Taxes , later. Tax forms ez Exception. Tax forms ez    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. Tax forms ez 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. Tax forms ez What To Deduct Your deduction may be for withheld taxes, estimated tax payments, or other tax payments as follows. Tax forms ez Withheld taxes. Tax forms ez   You can deduct state and local income taxes withheld from your salary in the year they are withheld. Tax forms ez Your Form(s) W-2 will show these amounts. Tax forms ez Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld. Tax forms ez Estimated tax payments. Tax forms ez   You can deduct estimated tax payments you made during the year to a state or local government. Tax forms ez However, you must have a reasonable basis for making the estimated tax payments. Tax forms ez Any estimated state or local tax payments that are not made in good faith at the time of payment are not deductible. Tax forms ez For example, you made an estimated state income tax payment. Tax forms ez However, the estimate of your state tax liability shows that you will get a refund of the full amount of your estimated payment. Tax forms ez You had no reasonable basis to believe you had any additional liability for state income taxes and you cannot deduct the estimated tax payment. Tax forms ez Refund applied to taxes. Tax forms ez   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. Tax forms ez    Do not reduce your deduction by either of the following items. Tax forms ez Any state or local income tax refund (or credit) you expect to receive for 2013. Tax forms ez Any refund of (or credit for) prior-year state and local income taxes you actually received in 2013. Tax forms ez   However, part or all of this refund (or credit) may be taxable. Tax forms ez See Refund (or credit) of state or local income taxes , later. Tax forms ez Separate federal returns. Tax forms ez   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. Tax forms ez Joint state and local returns. Tax forms ez   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. Tax forms ez 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. Tax forms ez However, you cannot deduct more than the amount you actually paid during the year. Tax forms ez 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. Tax forms ez If so, you and your spouse can deduct on your separate federal returns the amount you each actually paid. Tax forms ez Joint federal return. Tax forms ez   If you file a joint federal return, you can deduct the total of the state and local income taxes both of you paid. Tax forms ez Contributions to state benefit funds. Tax forms ez    As an employee, you can deduct mandatory contributions to state benefit funds withheld from your wages that provide protection against loss of wages. Tax forms ez For example, certain states require employees to make contributions to state funds providing disability or unemployment insurance benefits. Tax forms ez Mandatory payments made to the following state benefit funds are deductible as state income taxes on Schedule A (Form 1040), line 5. Tax forms ez Alaska Unemployment Compensation Fund. Tax forms ez California Nonoccupational Disability Benefit Fund. Tax forms ez New Jersey Nonoccupational Disability Benefit Fund. Tax forms ez New Jersey Unemployment Compensation Fund. Tax forms ez New York Nonoccupational Disability Benefit Fund. Tax forms ez Pennsylvania Unemployment Compensation Fund. Tax forms ez Rhode Island Temporary Disability Benefit Fund. Tax forms ez Washington State Supplemental Workmen's Compensation Fund. Tax forms ez    Employee contributions to private or voluntary disability plans are not deductible. Tax forms ez Refund (or credit) of state or local income taxes. Tax forms ez   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. Tax forms ez 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. Tax forms ez If you did not itemize your deductions in the previous year, do not include the refund in income. Tax forms ez 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. Tax forms ez For a discussion of how much to include, see Recoveries in chapter 12. Tax forms ez 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. Tax forms ez S. Tax forms ez possession. Tax forms ez However, you cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Tax forms ez S. Tax forms ez tax under the foreign earned income exclusion or the foreign housing exclusion. Tax forms ez For information on these exclusions, see Publication 54, Tax Guide for U. Tax forms ez S. Tax forms ez Citizens and Resident Aliens Abroad. Tax forms ez For information on the foreign tax credit, see Publication 514. Tax forms ez 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. Tax forms ez You can use either your actual expenses or the state and local sales tax tables to figure your sales tax deduction. Tax forms ez Actual expenses. Tax forms ez   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. Tax forms ez 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. Tax forms ez 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. Tax forms ez If you use the actual expenses method, you must have receipts to show the general sales taxes paid. Tax forms ez Do not include sales taxes paid on items used in your trade or business. Tax forms ez Motor vehicles. Tax forms ez   For purposes of this section, motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Tax forms ez This also includes sales taxes on a leased motor vehicle, but not on vehicles used in your trade or business. Tax forms ez Optional sales tax tables. Tax forms ez   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). Tax forms ez You may also be able to add the state and local general sales taxes paid on certain specified items. Tax forms ez   Your applicable table amount is based on the state where you live, your income, and the number of exemptions claimed on your tax return. Tax forms ez Your income is your adjusted gross income plus any nontaxable items such as the following. Tax forms ez Tax-exempt interest. Tax forms ez Veterans' benefits. Tax forms ez Nontaxable combat pay. Tax forms ez Workers' compensation. Tax forms ez Nontaxable part of social security and railroad retirement benefits. Tax forms ez Nontaxable part of IRA, pension, or annuity distributions, excluding rollovers. Tax forms ez Public assistance payments. Tax forms ez 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. Tax forms ez See the Instructions for Schedule A (Form 1040), line 5, for details. Tax forms ez Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real property levied for the general public welfare. Tax forms ez 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. Tax forms ez Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Tax forms ez 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. Tax forms ez For more information about taxes and charges that are not deductible, see Real Estate-Related Items You Cannot Deduct , later. Tax forms ez Tenant-shareholders in a cooperative housing corporation. Tax forms ez   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. Tax forms ez The corporation should provide you with a statement showing your share of the taxes. Tax forms ez For more information, see Special Rules for Cooperatives in Publication 530. Tax forms ez Division of real estate taxes between buyers and sellers. Tax forms ez   If you bought or sold real estate during the year, the real estate taxes must be divided between the buyer and the seller. Tax forms ez   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. Tax forms ez The seller is treated as paying the taxes up to, but not including, the date of sale. Tax forms ez The buyer is treated as paying the taxes beginning with the date of sale. Tax forms ez This applies regardless of the lien dates under local law. Tax forms ez Generally, this information is included on the settlement statement provided at the closing. Tax forms ez    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. Tax forms ez This lets you deduct the part of the tax to the date of sale even though you did not actually pay it. Tax forms ez However, you must also include the amount of that tax in the selling price of the property. Tax forms ez The buyer must include the same amount in his or her cost of the property. Tax forms ez   You figure your deduction for taxes on each property bought or sold during the real property tax year as follows. Tax forms ez Worksheet 22-1. Tax forms ez Figuring Your Real Estate Tax Deduction 1. Tax forms ez Enter the total real estate taxes for the real property tax year   2. Tax forms ez Enter the number of days in the real property tax year that you owned the property   3. Tax forms ez Divide line 2 by 365 (for leap years, divide line 2 by 366) . Tax forms ez 4. Tax forms ez Multiply line 1 by line 3. Tax forms ez This is your deduction. Tax forms ez Enter it on Schedule A (Form 1040), line 6   Note. Tax forms ez Repeat steps 1 through 4 for each property you bought or sold during the real property tax year. Tax forms ez Your total deduction is the sum of the line 4 amounts for all of the properties. Tax forms ez Real estate taxes for prior years. Tax forms ez   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. Tax forms ez Even if the buyer agrees to pay the delinquent taxes, the buyer cannot deduct them. Tax forms ez The buyer must add them to the cost of the property. Tax forms ez The seller can deduct these taxes paid by the buyer. Tax forms ez However, the seller must include them in the selling price. Tax forms ez Examples. Tax forms ez   The following examples illustrate how real estate taxes are divided between buyer and seller. Tax forms ez Example 1. Tax forms ez 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. Tax forms ez The tax on their old home, sold on May 7, was $620. Tax forms ez The tax on their new home, bought on May 3, was $732. Tax forms ez 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. Tax forms ez 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. Tax forms ez 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). Tax forms ez They figure their deduction for taxes on their old home as follows. Tax forms ez Worksheet 22-1. Tax forms ez Figuring Your Real Estate Tax Deduction — Taxes on Old Home 1. Tax forms ez Enter the total real estate taxes for the real property tax year $620 2. Tax forms ez Enter the number of days in the real property tax year that you owned the property 126 3. Tax forms ez Divide line 2 by 365 (for leap years, divide line 2 by 366) . Tax forms ez 3452 4. Tax forms ez Multiply line 1 by line 3. Tax forms ez This is your deduction. Tax forms ez 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. Tax forms ez (The buyers add the $214 to their cost of the home. Tax forms ez ) 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). Tax forms ez They figure their deduction for taxes on their new home as follows. Tax forms ez Worksheet 22-1. Tax forms ez Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Tax forms ez Enter the total real estate taxes for the real property tax year $732 2. Tax forms ez Enter the number of days in the real property tax year that you owned the property 243 3. Tax forms ez Divide line 2 by 365 (for leap years, divide line 2 by 366) . Tax forms ez 6658 4. Tax forms ez Multiply line 1 by line 3. Tax forms ez This is your deduction. Tax forms ez 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. Tax forms ez (The sellers add this $245 to their selling price and deduct the $245 as a real estate tax. Tax forms ez ) Dennis and Beth's real estate tax deduction for their old and new homes is the sum of $214 and $487, or $701. Tax forms ez They will enter this amount on Schedule A (Form 1040), line 6. Tax forms ez Example 2. Tax forms ez George and Helen Brown bought a new home on May 3, 2013. Tax forms ez Their real property tax year for the new home is the calendar year. Tax forms ez Real estate taxes for 2012 were assessed in their state on January 1, 2013. Tax forms ez The taxes became due on May 31, 2013, and October 31, 2013. Tax forms ez The Browns agreed to pay all taxes due after the date of purchase. Tax forms ez Real estate taxes for 2012 were $680. Tax forms ez They paid $340 on May 31, 2013, and $340 on October 31, 2013. Tax forms ez These taxes were for the 2012 real property tax year. Tax forms ez The Browns cannot deduct them since they did not own the property until 2013. Tax forms ez Instead, they must add $680 to the cost of their new home. Tax forms ez In January 2014, the Browns receive their 2013 property tax statement for $752, which they will pay in 2014. Tax forms ez The Browns owned their new home during the 2013 real property tax year for 243 days (May 3 to December 31). Tax forms ez They will figure their 2014 deduction for taxes as follows. Tax forms ez Worksheet 22-1. Tax forms ez Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Tax forms ez Enter the total real estate taxes for the real property tax year $752 2. Tax forms ez Enter the number of days in the real property tax year that you owned the property 243 3. Tax forms ez Divide line 2 by 365 (for leap years, divide line 2 by 366) . Tax forms ez 6658 4. Tax forms ez Multiply line 1 by line 3. Tax forms ez This is your deduction. Tax forms ez 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. Tax forms ez 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. Tax forms ez This is the sum of the $680 for 2012 and the $251 for the 122 days the seller owned the home in 2013. Tax forms ez The seller must also include the $931 in the selling price when he or she figures the gain or loss on the sale. Tax forms ez The seller should contact the Browns in January 2014 to find out how much real estate tax is due for 2013. Tax forms ez Form 1099-S. Tax forms ez   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. Tax forms ez 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. Tax forms ez 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. Tax forms ez   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. Tax forms ez 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. Tax forms ez See Refund (or rebate) , later. Tax forms ez Taxes placed in escrow. Tax forms ez   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. Tax forms ez You can deduct only the real estate tax that the third party actually paid to the taxing authority. Tax forms ez 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. Tax forms ez Tenants by the entirety. Tax forms ez   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. Tax forms ez Divorced individuals. Tax forms ez   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. Tax forms ez See Taxes and insurance in chapter 18 for more information. Tax forms ez Ministers' and military housing allowances. Tax forms ez   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. Tax forms ez Refund (or rebate). Tax forms ez   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. Tax forms ez 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. Tax forms ez However, the amount you include in income is limited to the amount of the deduction that reduced your tax in the earlier year. Tax forms ez For more information, see Recoveries in chapter 12. Tax forms ez Table 22-1. Tax forms ez 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. Tax forms ez 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 ). Tax forms ez     Fines and penalties. Tax forms ez Income Taxes State and local income taxes. Tax forms ez Federal income taxes. Tax forms ez   Foreign income taxes. Tax forms ez     Employee contributions to state funds listed under Contributions to state benefit funds . Tax forms ez Employee contributions to private or voluntary disability plans. Tax forms ez     State and local general sales taxes if you choose to deduct state and local income taxes. Tax forms ez General Sales Taxes State and local general sales taxes, including compensating use taxes. Tax forms ez State and local income taxes if you choose to deduct state and local general sales taxes. Tax forms ez Other Taxes Taxes that are expenses of your trade or business. Tax forms ez Federal excise taxes, such as tax on gasoline, that are not expenses of your trade or business or of producing income. Tax forms ez   Taxes on property producing rent or royalty income. Tax forms ez Per capita taxes. Tax forms ez   Occupational taxes. Tax forms ez See chapter 28. Tax forms ez     One-half of self-employment tax paid. Tax forms ez   Personal Property Taxes State and local personal property taxes. Tax forms ez Customs duties that are not expenses of your trade or business or of producing income. Tax forms ez Real Estate Taxes State and local real estate taxes. Tax forms ez Real estate taxes that are treated as imposed on someone else (see Division of real estate taxes between buyers and sellers ). Tax forms ez   Foreign real estate taxes. Tax forms ez Taxes for local benefits (with exceptions). Tax forms ez See Real Estate-Related Items You Cannot Deduct . Tax forms ez   Tenant's share of real estate taxes paid by  cooperative housing corporation. Tax forms ez Trash and garbage pickup fees (with exceptions). Tax forms ez See Real Estate-Related Items You Cannot Deduct . Tax forms ez     Rent increase due to higher real estate taxes. Tax forms ez     Homeowners' association charges. Tax forms ez Real Estate-Related Items You Cannot Deduct Payments for the following items generally are not deductible as real estate taxes. Tax forms ez Taxes for local benefits. Tax forms ez Itemized charges for services (such as trash and garbage pickup fees). Tax forms ez Transfer taxes (or stamp taxes). Tax forms ez Rent increases due to higher real estate taxes. Tax forms ez Homeowners' association charges. Tax forms ez Taxes for local benefits. Tax forms ez   Deductible real estate taxes generally do not include taxes charged for local benefits and improvements tending to increase the value of your property. Tax forms ez These include assessments for streets, sidewalks, water mains, sewer lines, public parking facilities, and similar improvements. Tax forms ez You should increase the basis of your property by the amount of the assessment. Tax forms ez   Local benefit taxes are deductible only if they are for maintenance, repair, or interest charges related to those benefits. Tax forms ez 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. Tax forms ez If you cannot determine what part of the tax is for maintenance, repair, or interest, none of it is deductible. Tax forms ez    Taxes for local benefits may be included in your real estate tax bill. Tax forms ez If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Tax forms ez You should use the rules above to determine if the local benefit tax is deductible. Tax forms ez Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Tax forms ez Itemized charges for services. Tax forms ez    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. Tax forms ez 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). Tax forms ez    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. Tax forms ez If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Tax forms ez Exception. Tax forms ez   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. Tax forms ez Transfer taxes (or stamp taxes). Tax forms ez   Transfer taxes and similar taxes and charges on the sale of a personal home are not deductible. Tax forms ez If they are paid by the seller, they are expenses of the sale and reduce the amount realized on the sale. Tax forms ez If paid by the buyer, they are included in the cost basis of the property. Tax forms ez Rent increase due to higher real estate taxes. Tax forms ez   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. Tax forms ez Homeowners' association charges. Tax forms ez   These charges are not deductible because they are imposed by the homeowners' association, rather than the state or local government. Tax forms ez 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. Tax forms ez A tax that meets the above requirements can be considered charged on personal property even if it is for the exercise of a privilege. Tax forms ez 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. Tax forms ez If the tax is partly based on value and partly based on other criteria, it may qualify in part. Tax forms ez Example. Tax forms ez Your state charges a yearly motor vehicle registration tax of 1% of value plus 50 cents per hundredweight. Tax forms ez You paid $32 based on the value ($1,500) and weight (3,400 lbs. Tax forms ez ) of your car. Tax forms ez You can deduct $15 (1% × $1,500) as a personal property tax because it is based on the value. Tax forms ez The remaining $17 ($. Tax forms ez 50 × 34), based on the weight, is not deductible. Tax forms ez 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. Tax forms ez Other taxes and fees, such as federal income taxes, are not deductible because the tax law specifically prohibits a deduction for them. Tax forms ez See Table 22-1. Tax forms ez Taxes and fees that are generally not deductible include the following items. Tax forms ez Employment taxes. Tax forms ez This includes social security, Medicare, and railroad retirement taxes withheld from your pay. Tax forms ez However, one-half of self-employment tax you pay is deductible. Tax forms ez 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. Tax forms ez For more information, see chapters 21 and 32. Tax forms ez Estate, inheritance, legacy, or succession taxes. Tax forms ez 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. Tax forms ez In that case, deduct the estate tax as a miscellaneous deduction that is not subject to the 2%-of-adjusted-gross-income limit. Tax forms ez For more information, see Publication 559, Survivors, Executors, and Administrators. Tax forms ez Federal income taxes. Tax forms ez This includes income taxes withheld from your pay. Tax forms ez Fines and penalties. Tax forms ez You cannot deduct fines and penalties paid to a government for violation of any law, including related amounts forfeited as collateral deposits. Tax forms ez Gift taxes. Tax forms ez License fees. Tax forms ez You cannot deduct license fees for personal purposes (such as marriage, driver's, and dog license fees). Tax forms ez Per capita taxes. Tax forms ez You cannot deduct state or local per capita taxes. Tax forms ez 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. Tax forms ez For other nondeductible items, see Real Estate-Related Items You Cannot Deduct , earlier. Tax forms ez Where To Deduct You deduct taxes on the following schedules. Tax forms ez State and local income taxes. Tax forms ez    These taxes are deducted on Schedule A (Form 1040), line 5, even if your only source of income is from business, rents, or royalties. Tax forms ez Check box a on line 5. Tax forms ez General sales taxes. Tax forms ez   Sales taxes are deducted on Schedule A (Form 1040), line 5. Tax forms ez You must check box b on line 5. Tax forms ez If you elect to deduct sales taxes, you cannot deduct state and local income taxes on Schedule A (Form 1040), line 5, box a. Tax forms ez Foreign income taxes. Tax forms ez   Generally, income taxes you pay to a foreign country or U. Tax forms ez S. Tax forms ez possession can be claimed as an itemized deduction on Schedule A (Form 1040), line 8, or as a credit against your U. Tax forms ez S. Tax forms ez income tax on Form 1040, line 47. Tax forms ez To claim the credit, you may have to complete and attach Form 1116. Tax forms ez For more information, see chapter 37, the Form 1040 instructions, or Publication 514. Tax forms ez Real estate taxes and personal property taxes. Tax forms ez    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). Tax forms ez Taxes on property that produces rent or royalty income are deducted on Schedule E (Form 1040). Tax forms ez Self-employment tax. Tax forms ez    Deduct one-half of your self-employment tax on Form 1040, line 27. Tax forms ez Other taxes. Tax forms ez    All other deductible taxes are deducted on Schedule A (Form 1040), line 8. Tax forms ez Prev  Up  Next   Home   More Online Publications
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Tax forms ez Publication 584 - Additional Material Table of Contents This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Entrance Hall This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Living Room This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Dining Room This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Kitchen This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Den This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Bedrooms This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Bathrooms This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Recreation Room This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Laundry and Basement This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Garage This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Sporting Equipment This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Men's Clothing This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Women's Clothing This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Children's Clothing This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Jewelry This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Electrical Appliances This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Linens This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Miscellaneous This image is too large to be displayed in the current screen. Tax forms ez Please click the link to view the image. Tax forms ez Motor Vehicles Schedule 20. Tax forms ez Home (Excluding Contents) Note. Tax forms ez If you used the entire property as your home, fill out only column (a). Tax forms ez If you used part of the property as your home and part of it for business or to produce rental income, you must allocate the entries on lines 2-9 between the personal part (column (a)) and the business/rental part (column (b)). Tax forms ez 1. Tax forms ez Description of property (Show location and date acquired. Tax forms ez )     (a)  Personal Part (b)  Business/Rental Part 2. Tax forms ez Cost or other (adjusted) basis of property (from Worksheet A)     3. Tax forms ez Insurance or other reimbursement Note. Tax forms ez If line 2 is more than line 3, skip line 4. Tax forms ez If line 3 is more than line 2, you exclude gain, and the gain is more than you can exclude, see the instructions for line 3 in the Instructions for Form 4684 for the amount to enter. Tax forms ez     4. Tax forms ez Gain from casualty. Tax forms ez If line 3 is more than line 2, enter the difference here and skip lines 5 through 9. Tax forms ez But see Next below line 9. Tax forms ez     5. Tax forms ez Fair market value before casualty     6. Tax forms ez Fair market value after casualty     7. Tax forms ez Decrease in fair market value. Tax forms ez Subtract line 6 from line 5. Tax forms ez     8. Tax forms ez Enter the smaller of line 2 or line 7 Note for business/rental part. Tax forms ez If the property was totally destroyed by casualty, enter on line 8, column (b) the amount from line 2, column (b). Tax forms ez     9. Tax forms ez Subtract line 3 from line 8. Tax forms ez If zero or less, enter -0-. Tax forms ez     Next: Transfer the entries from line 1 and lines 2-9, column (a), above to the corresponding lines on Form 4684, Section A. Tax forms ez Transfer the entries from line 1 and lines 2-9, column (b), to the corresponding lines on Form 4684, Section B. Tax forms ez Worksheet A. Tax forms ez Cost or Other (Adjusted) Basis Caution. Tax forms ez See the Worksheet A Instructions before you use this worksheet. Tax forms ez         (a) Personal Part (b) Business/Rental Part 1. Tax forms ez   Enter the purchase price of the home damaged or destroyed. Tax forms ez (If you filed Form 2119 when you originally acquired that home to postpone gain on the sale of a previous home before May 7, 1997, enter the adjusted basis of the new home from that Form 2119. Tax forms ez ) 1. Tax forms ez     2. Tax forms ez   Seller paid points for home bought after 1990. Tax forms ez Do not include any seller-paid points you already subtracted to arrive at the amount entered on line 1 2. Tax forms ez     3. Tax forms ez   Subtract line 2 from line 1 3. Tax forms ez     4. Tax forms ez   Settlement fees or closing costs. Tax forms ez (See Settlement costs in Publication 551. Tax forms ez ) If line 1 includes the adjusted basis of the new home from Form 2119, skip lines 4a-4g and 5; go to line 6. Tax forms ez         a. Tax forms ez Abstract and recording fees 4a. Tax forms ez       b. Tax forms ez Legal fees (including fees for title search and preparing documents) 4b. Tax forms ez       c. Tax forms ez Survey fees 4c. Tax forms ez       d. Tax forms ez Title insurance 4d. Tax forms ez       e. Tax forms ez Transfer or stamp taxes 4e. Tax forms ez       f. Tax forms ez Amounts that the seller owed that you agreed to pay (back taxes or interest, recording or mortgage fees, and sales commissions) 4f. Tax forms ez       g. Tax forms ez Other 4g. Tax forms ez     5. Tax forms ez   Add lines 4a through 4g 5. Tax forms ez     6. Tax forms ez   Cost of additions and improvements. Tax forms ez (See Increases to Basis in Publication 551. Tax forms ez ) Do not include any additions and improvements included on line 1 6. Tax forms ez     7. Tax forms ez   Special tax assessments paid for local improvements, such as streets and sidewalks 7. Tax forms ez     8. Tax forms ez   Other increases to basis 8. Tax forms ez     9. Tax forms ez   Add lines 3, 5, 6, 7, and 8 9. Tax forms ez     10. Tax forms ez   Depreciation allowed or allowable, related to the business use or rental of the home 10. Tax forms ez 0   11. Tax forms ez   Other decreases to basis (See Decreases to Basis in Publication 551. Tax forms ez ) 11. Tax forms ez     12. Tax forms ez   Add lines 10 and 11 12. Tax forms ez     13. Tax forms ez   Cost or other (adjusted) basis of home damaged or destroyed. Tax forms ez Subtract line 12 from line 9. Tax forms ez Enter here and on Schedule 20, line 2 13. Tax forms ez     Worksheet A Instructions. Tax forms ez If you use Worksheet A to figure the cost or other (adjusted) basis of your home, follow these instructions. Tax forms ez DO NOT use this worksheet to determine your basis if you acquired an interest in your home from a decedent who died in 2010 and whose executor filed Form 8939. Tax forms ez IF. Tax forms ez . Tax forms ez . Tax forms ez   THEN. Tax forms ez . Tax forms ez . Tax forms ez you inherited your home from a decedent who died either before or after 2010 or from a decedent who died in 2010 and whose executor did not file Form 8939. Tax forms ez 1 skip lines 1–4 of the worksheet. Tax forms ez 2 find your basis using the rules under Inherited Property in Publication 551. Tax forms ez Enter this amount on line 5 of the worksheet. Tax forms ez 3 fill out lines 6–13 of the worksheet. Tax forms ez you received your home as a gift 1 read Property Received as a Gift in Publication 551 and enter on lines 1 and 3 of the worksheet either the donor's adjusted basis or the home's fair market value at the time of the gift, whichever is appropriate. Tax forms ez 2 if you can add any federal gift tax to your basis, enter that amount on line 5 of the worksheet. Tax forms ez 3 fill out the rest of the worksheet. Tax forms ez you received your home as a trade for other property 1 enter on line 1 of the worksheet the fair market value of the other property at the time of the trade. Tax forms ez (But if you received your home as a trade for your previous home before May 7, 1997, and had a gain on the trade that you postponed using Form 2119, enter on line 1 of the worksheet the adjusted basis of the new home from that Form 2119. Tax forms ez ) 2 fill out the rest of the worksheet. Tax forms ez you built your home 1 add the purchase price of the land and the cost of building the home. Tax forms ez Enter that total on line 1 of the worksheet. Tax forms ez (However, if you filed a Form 2119 to postpone gain on the sale of a previous home before May 7, 1997, enter on line 1 of the worksheet the adjusted basis of the new home from that Form 2119. Tax forms ez ) 2 fill out the rest of the worksheet. Tax forms ez you received your home from your spouse after July 18, 1984 1 skip lines 1–4 of the worksheet. Tax forms ez 2 enter on line 5 of the worksheet your spouse's cost or other (adjusted) basis in the home just before you received it. Tax forms ez 3 fill out lines 6–13 of the worksheet, making adjustments to basis only for events after the transfer. Tax forms ez you owned a home jointly with your spouse, who transferred his or her interest in the home to you after July 18, 1984     fill out one worksheet, making adjustments to basis for events both before and after the transfer. Tax forms ez   you received your home from your spouse before July 19, 1984 1 skip lines 1–4 of the worksheet. Tax forms ez 2 enter on line 5 of the worksheet the home's fair market value at the time you received it. Tax forms ez 3 fill out lines 6–13 of the worksheet, making adjustments to basis only for events after the transfer. Tax forms ez you owned a home jointly with your spouse, and your spouse transferred his or her interest in the home to you before July 19, 1984 1 fill out a worksheet, lines 1–13, making adjustments to basis only for events before the transfer. Tax forms ez 2 multiply the amount on line 13 of that worksheet by 50% (0. Tax forms ez 50) to get the adjusted basis of your half-interest at the time of the transfer. Tax forms ez 3 multiply the fair market value of the home at the time of the transfer by 50% (0. Tax forms ez 50). Tax forms ez Generally, this is the basis of the half-interest that your spouse owned. Tax forms ez 4 add the amounts from steps 2 and 3 and enter the total on line 5 of a second worksheet. Tax forms ez 5 complete lines 6–13 of the second worksheet, making adjustments to basis only for events after the transfer. Tax forms ez you owned your home jointly with a nonspouse 1 fill out lines 1–13 of the worksheet. Tax forms ez 2 multiply the amount on line 13 by your percentage of ownership to get the adjusted basis of your part-interest. Tax forms ez Worksheet A Instructions. Tax forms ez (Continued) IF. Tax forms ez . Tax forms ez . Tax forms ez   THEN. Tax forms ez . Tax forms ez . Tax forms ez you owned your home jointly with your spouse who died before 2010 and before the casualty 1 fill out a worksheet, lines 1–13, including adjustments to basis only for events before your spouse's death. Tax forms ez 2 multiply the amount on line 13 of that worksheet by 50% (0. Tax forms ez 50) to get the adjusted basis of your half-interest on the date of death. Tax forms ez 3 figure the basis for the half-interest owned by your spouse. Tax forms ez This is one-half of the fair market value on the date of death (or later alternate valuation used for estate or inheritance tax). Tax forms ez (The basis in your half will remain one-half of the adjusted basis determined in step 2. Tax forms ez ) 4 add the amounts from steps 2 and 3 and enter the total on line 5 of a second worksheet. Tax forms ez 5 complete lines 6–13 of the second worksheet, making adjustments to basis only for events after your spouse's death. Tax forms ez you owned your home jointly with your spouse who died before 2010 and before the casualty, and your permanent legal home is in a community property state 1 skip lines 1–4 of the worksheet. Tax forms ez 2 enter the amount of your basis on line 5 of the worksheet. Tax forms ez Generally, this is the fair market value of the home at the time of death. Tax forms ez (But see Community Property in Publication 551 for special rules. Tax forms ez ) 3 fill out lines 6–13 of the worksheet, making adjustments to basis only for events after your spouse's death. Tax forms ez you owned your home jointly with a nonspouse who died before 2010 and before the casualty 1 fill out lines 1–13 of the worksheet, including adjustments to basis only for events before the co-owner's death. Tax forms ez 2 multiply the amount on line 13 by your percentage of ownership to get the adjusted basis of your part-interest on the date of death. Tax forms ez 3 multiply the fair market value on the date of death (or later alternate valuation used for estate or inheritance tax) by the co-owner's percentage of ownership. Tax forms ez This is the basis for the co-owner's part-interest. Tax forms ez 4 add the amounts from steps 2 and 3 and enter the total on line 5 of a second worksheet. Tax forms ez 5 complete lines 6–13 of the second worksheet, including adjustments to basis only for events after the co-owner's death. Tax forms ez your home was ever damaged as a result of a prior casualty 1 on line 8 of the worksheet, enter any amounts you spent to restore the home to its condition before the prior casualty. Tax forms ez 2 on line 11 enter: any insurance reimbursements you received (or expect to receive) for the prior loss,  and any deductible casualty losses from prior years not covered by insurance. Tax forms ez the person who sold you your home paid points on your loan and you bought your home after 1990 but before April 4, 1994. Tax forms ez   on line 2 enter the seller-paid points only if you deducted them as home mortgage interest in the year paid (unless you used the seller-paid points to reduce the amount on line 1). Tax forms ez the person who sold you your home paid points on your loan and you bought your home after April 3, 1994   on line 2 enter the seller-paid points even if you did not deduct them (unless you used the seller-paid points to reduce the amount on line 1). Tax forms ez you used part of the property as your home and part of it for business or to produce rental income   you must allocate the entries on Worksheet A between the personal part (column (a)) and the business/rental part (column (b)). Tax forms ez none of these items apply   fill out the entire worksheet. Tax forms ez Prev  Up  Next   Home   More Online Publications