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Freestatetaxreturns Publication 463 - Introductory Material Table of Contents Future Developments What's New Reminder IntroductionUsers of employer-provided vehicles. Freestatetaxreturns Volunteers. Freestatetaxreturns Ordering forms and publications. Freestatetaxreturns Tax questions. Freestatetaxreturns Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 463, such as legislation enacted after it was published, go to www. Freestatetaxreturns irs. Freestatetaxreturns gov/pub463. Freestatetaxreturns What's New Standard mileage rate. Freestatetaxreturns  For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Freestatetaxreturns Car expenses and use of the standard mileage rate are explained in chapter 4. Freestatetaxreturns Depreciation limits on cars, trucks, and vans. Freestatetaxreturns  For 2013, the first-year limit on the total depreciation deduction for cars remains at $11,160 ($3,160 if you elect not to claim the special depreciation allowance). Freestatetaxreturns For trucks and vans the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). Freestatetaxreturns Depreciation limits are explained in chapter 4. Freestatetaxreturns Section 179 deduction. Freestatetaxreturns  For 2013, the section 179 deduction limit on qualifying property purchases (including cars, trucks, and vans) is a total of $500,000 and the limit on those purchases at which the deduction begins to be phased out is $2,000,000. Freestatetaxreturns Section 179 Deduction is explained in chapter 4. Freestatetaxreturns Special depreciation allowance. Freestatetaxreturns  For 2013, the special (“bonus”) depreciation allowance on qualified property (including cars, trucks, and vans) remains at 50%. Freestatetaxreturns Special Depreciation Allowance is explained in chapter 4. Freestatetaxreturns Reminder Photographs of missing children. Freestatetaxreturns  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Freestatetaxreturns Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Freestatetaxreturns You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Freestatetaxreturns Per diem rates. Freestatetaxreturns  The IRS no longer updates Publication 1542, Per Diem Rates (For Travel Within the Continental United States). Freestatetaxreturns Instead, current per diem rates may be found on the U. Freestatetaxreturns S. Freestatetaxreturns General Services Administration (GSA) website at www. Freestatetaxreturns gsa. Freestatetaxreturns gov/perdiem. Freestatetaxreturns Introduction You may be able to deduct the ordinary and necessary business-related expenses you have for: Travel, Entertainment, Gifts, or Transportation. Freestatetaxreturns An ordinary expense is one that is common and accepted in your trade or business. Freestatetaxreturns A necessary expense is one that is helpful and appropriate for your business. Freestatetaxreturns An expense does not have to be required to be considered necessary. Freestatetaxreturns This publication explains: What expenses are deductible, How to report them on your return, What records you need to prove your expenses, and How to treat any expense reimbursements you may receive. Freestatetaxreturns Who should use this publication. Freestatetaxreturns   You should read this publication if you are an employee or a sole proprietor who has business-related travel, entertainment, gift, or transportation expenses. Freestatetaxreturns Users of employer-provided vehicles. Freestatetaxreturns   If an employer-provided vehicle was available for your use, you received a fringe benefit. Freestatetaxreturns Generally, your employer must include the value of the use or availability of the vehicle in your income. Freestatetaxreturns However, there are exceptions if the use of the vehicle qualifies as a working condition fringe benefit (such as the use of a qualified nonpersonal use vehicle). Freestatetaxreturns   A working condition fringe benefit is any property or service provided to you by your employer for which you could deduct the cost as an employee business expense if you had paid for it. Freestatetaxreturns   A qualified nonpersonal use vehicle is one that is not likely to be used more than minimally for personal purposes because of its design. Freestatetaxreturns See Qualified nonpersonal use vehicles under Actual Car Expenses in chapter 4. Freestatetaxreturns   For information on how to report your car expenses that your employer did not provide or reimburse you for (such as when you pay for gas and maintenance for a car your employer provides), see Vehicle Provided by Your Employer in chapter 6. Freestatetaxreturns Who does not need to use this publication. Freestatetaxreturns   Partnerships, corporations, trusts, and employers who reimburse their employees for business expenses should refer to their tax form instructions and chapter 11 of Publication 535, Business Expenses, for information on deducting travel, meals, and entertainment expenses. Freestatetaxreturns   If you are an employee, you will not need to read this publication if all of the following are true. Freestatetaxreturns You fully accounted to your employer for your work-related expenses. Freestatetaxreturns You received full reimbursement for your expenses. Freestatetaxreturns Your employer required you to return any excess reimbursement and you did so. Freestatetaxreturns There is no amount shown with a code “L” in box 12 of your Form W-2, Wage and Tax Statement. Freestatetaxreturns If you meet all of these conditions, there is no need to show the expenses or the reimbursements on your return. Freestatetaxreturns If you would like more information on reimbursements and accounting to your employer, see chapter 6 . Freestatetaxreturns    If you meet these conditions and your employer included reimbursements on your Form W-2 in error, ask your employer for a corrected Form W-2. Freestatetaxreturns Volunteers. Freestatetaxreturns   If you perform services as a volunteer worker for a qualified charity, you may be able to deduct some of your costs as a charitable contribution. Freestatetaxreturns See Out-of-Pocket Expenses in Giving Services in Publication 526, Charitable Contributions, for information on the expenses you can deduct. Freestatetaxreturns Comments and suggestions. Freestatetaxreturns   We welcome your comments about this publication and your suggestions for future editions. Freestatetaxreturns   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Freestatetaxreturns NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Freestatetaxreturns Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Freestatetaxreturns   You can send your comments from www. Freestatetaxreturns irs. Freestatetaxreturns gov/formspubs/. Freestatetaxreturns Click on “More Information” and then on “Comment on Tax Forms and Publications. Freestatetaxreturns ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Freestatetaxreturns Ordering forms and publications. Freestatetaxreturns   Visit www. Freestatetaxreturns irs. Freestatetaxreturns gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Freestatetaxreturns Internal Revenue Service 1201 N. Freestatetaxreturns Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Freestatetaxreturns   If you have a tax question, check the information available on IRS. Freestatetaxreturns gov or call 1-800-829-1040. Freestatetaxreturns We cannot answer tax questions sent to either of the above addresses. Freestatetaxreturns Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 529 Miscellaneous Deductions 535 Business Expenses 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business Schedule C-EZ (Form 1040) Net Profit From Business Schedule F (Form 1040) Profit or Loss From Farming 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization See chapter 7, How To Get Tax Help , for information about getting these publications and forms. Freestatetaxreturns Prev  Up  Next   Home   More Online Publications
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  • BBB Warns of an Email Phishing Scam
    The Better Business Bureau is warning consumers about a new email scam designed to steal your money. Be on the lookout for an email claiming to be from someone you know who is stuck in another country. They are asking you to give them a loan to pay for their hotel bills and airfare home and request that you respond via email.
  • Beware of Osama Bin Laden Email Phishing Schemes
    The death of Osama bin Laden has garnered attention and interest around the world. Unfortunately, major news events like this one often bring a wave of phishing scams designed to collect your personal or financial information without your knowledge. Phishing scammers use email or malicious websites to solicit information by posing as a trustworthy source. For example, a scam may send an email that looks like it's from a reputable news organization with links to photos or video when, in fact, it takes you to a malicious website or downloads harmful viruses onto your computer.
  • Don't Open Bogus Email that Claims to Come From the FTC
    A bogus email is circulating that says it is from the Federal Trade Commission, referencing a 'complaint' filed with the FTC against the email's recipient. The email includes links and an attachment that download a virus. As with any suspicious email, the FTC warns recipients not to click on links within the email and not to open any attachments.
  • E-mail Claiming to Be From the FDIC
    The Federal Deposit Insurance Corporation (FDIC) has received numerous reports of a fraudulent e-mail that has the appearance of being sent from the FDIC. The subject line of the e- mail states: 'check your Bank Deposit Insurance Coverage.' The e-mail tells recipients that, 'You have received this message because you are a holder of a FDIC-insured bank account. Recently FDIC has officially named the bank you have opened your account with as a failed bank, thus, taking control of its assets.'
  • E-mails Containing Threats and Extortion
    The Internet Crime Complaint Center has recently received information concerning spam e-mails from 1wayout@myway.com threatening to assassinate the recipient unless the recipient pays several thousand dollars to the sender of the email. The subject claims to have been following the victim for some time and was supposedly hired to kill the victim by a friend of the victim. The subject threatens to carry out the assassination if the victim goes to the police and requests the victim to respond quickly and provide their telephone number.
  • FTC Warns Consumers About Bogus E-Mail That Claims to Be From Agency
    Consumers, including corporate and banking executives, appear to be targets of a bogus e-mail supposedly sent by the Federal Trade Commission but actually sent by third parties hoping to install spyware on computers. The bogus e-mail poses as an acknowledgment of a complaint filed by the recipient, and includes an attachment. Consumers who open the attachment to this e-mail unleash malicious spyware onto their computer.
  • Gmail Phishing Attack
    US-CERT is aware of public reports of a phishing attack that specifically targets US government and military officials' Gmail accounts. The attack arrives via an email sent from a spoofed address of an individual or agency known to the targeted user. The email contains a "view download" link that leads to a fake Gmail login page. The login information is then sent to an attacker.
  • Mass Marketing Fraud
    A few decades ago, mass marketing fraud - the kind that exploits mass communication techniques like bulk mail or telemarketing - was relatively low-tech and mostly a regional crime problem targeting victims nearby. These days, it's a different story. Thanks to the Internet, criminals and crime groups can also target victims halfway around the world, blasting out spam e-mails by the millions and setting up phony but realistic websites to lure people in.
  • Sham Site Is a Scam: There Is No "National Do Not E-mail Registry"
    Have you submitted your e-mail address to a "National Do Not E-mail Registry" that promises to reduce the amount of spam (unsolicited e-mail) you receive? If so, you are the victim of a scam, according to the Federal Trade Commission (FTC). The web site at "unsub.us" mimics the language, look, and navigation of the Web site for the National Do Not Call Registry, a legitimate free service of the federal government. The "unsub.us" site is not run or authorized by the FTC and is concerned that the "unsub.us" site could be part of a high-tech scam that uses a deceptive Web site to trick consumers into disclosing their e-mail address or other sensitive personal information.
  • Spammers Continue to Abuse the Names of Top Government Executives by Misusing the Name of the United States Attorney General
    As with previous spam attacks, which have included the names of high- ranking FBI executives and names of various government agencies, a new version misuses the name of the United States Attorney General, Eric Holder. The current spam alleges that the Department of Homeland Security and the Federal Bureau of Investigation were informed the e-mail recipient is allegedly involved in money laundering and terrorist-related activities. To avoid legal prosecution, the recipient must obtain a certificate from the Economic Financial Crimes Commission (EFCC) Chairman at a cost of $370.

The Freestatetaxreturns

Freestatetaxreturns 22. Freestatetaxreturns   Taxes Table of Contents IntroductionIndian tribal government. Freestatetaxreturns 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. Freestatetaxreturns Real Estate TaxesReal estate taxes for prior years. Freestatetaxreturns Examples. Freestatetaxreturns Form 1099-S. Freestatetaxreturns 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). Freestatetaxreturns It also explains which taxes you can deduct on other schedules or forms and which taxes you cannot deduct. Freestatetaxreturns This chapter covers the following topics. Freestatetaxreturns Income taxes (federal, state, local, and foreign). Freestatetaxreturns General sales taxes (state and local). Freestatetaxreturns Real estate taxes (state, local, and foreign). Freestatetaxreturns Personal property taxes (state and local). Freestatetaxreturns Taxes and fees you cannot deduct. Freestatetaxreturns Use Table 22-1 as a guide to determine which taxes you can deduct. Freestatetaxreturns The end of the chapter contains a section that explains which forms you use to deduct different types of taxes. Freestatetaxreturns Business taxes. Freestatetaxreturns   You can deduct certain taxes only if they are ordinary and necessary expenses of your trade or business or of producing income. Freestatetaxreturns For information on these taxes, see Publication 535, Business Expenses. Freestatetaxreturns State or local taxes. Freestatetaxreturns   These are taxes imposed by the 50 states, U. Freestatetaxreturns S. Freestatetaxreturns possessions, or any of their political subdivisions (such as a county or city), or by the District of Columbia. Freestatetaxreturns Indian tribal government. Freestatetaxreturns   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. Freestatetaxreturns 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. Freestatetaxreturns General sales taxes. Freestatetaxreturns   These are taxes imposed at one rate on retail sales of a broad range of classes of items. Freestatetaxreturns Foreign taxes. Freestatetaxreturns   These are taxes imposed by a foreign country or any of its political subdivisions. Freestatetaxreturns 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. Freestatetaxreturns The tax must be imposed on you. Freestatetaxreturns You must pay the tax during your tax year. Freestatetaxreturns The tax must be imposed on you. Freestatetaxreturns   In general, you can deduct only taxes imposed on you. Freestatetaxreturns   Generally, you can deduct property taxes only if you are an owner of the property. Freestatetaxreturns 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. Freestatetaxreturns You must pay the tax during your tax year. Freestatetaxreturns   If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during your tax year. Freestatetaxreturns 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. Freestatetaxreturns 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. Freestatetaxreturns 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). Freestatetaxreturns See Publication 538, Accounting Periods and Methods, for details. Freestatetaxreturns    If you use an accrual method of accounting, see Publication 538 for more information. Freestatetaxreturns Income Taxes This section discusses the deductibility of state and local income taxes (including employee contributions to state benefit funds) and foreign income taxes. Freestatetaxreturns State and Local Income Taxes You can deduct state and local income taxes. Freestatetaxreturns However, you can elect to deduct state and local general sales taxes instead of state and local income taxes. Freestatetaxreturns See General Sales Taxes , later. Freestatetaxreturns Exception. Freestatetaxreturns    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. Freestatetaxreturns 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. Freestatetaxreturns What To Deduct Your deduction may be for withheld taxes, estimated tax payments, or other tax payments as follows. Freestatetaxreturns Withheld taxes. Freestatetaxreturns   You can deduct state and local income taxes withheld from your salary in the year they are withheld. Freestatetaxreturns Your Form(s) W-2 will show these amounts. Freestatetaxreturns Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld. Freestatetaxreturns Estimated tax payments. Freestatetaxreturns   You can deduct estimated tax payments you made during the year to a state or local government. Freestatetaxreturns However, you must have a reasonable basis for making the estimated tax payments. Freestatetaxreturns Any estimated state or local tax payments that are not made in good faith at the time of payment are not deductible. Freestatetaxreturns For example, you made an estimated state income tax payment. Freestatetaxreturns However, the estimate of your state tax liability shows that you will get a refund of the full amount of your estimated payment. Freestatetaxreturns You had no reasonable basis to believe you had any additional liability for state income taxes and you cannot deduct the estimated tax payment. Freestatetaxreturns Refund applied to taxes. Freestatetaxreturns   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. Freestatetaxreturns    Do not reduce your deduction by either of the following items. Freestatetaxreturns Any state or local income tax refund (or credit) you expect to receive for 2013. Freestatetaxreturns Any refund of (or credit for) prior-year state and local income taxes you actually received in 2013. Freestatetaxreturns   However, part or all of this refund (or credit) may be taxable. Freestatetaxreturns See Refund (or credit) of state or local income taxes , later. Freestatetaxreturns Separate federal returns. Freestatetaxreturns   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. Freestatetaxreturns Joint state and local returns. Freestatetaxreturns   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. Freestatetaxreturns 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. Freestatetaxreturns However, you cannot deduct more than the amount you actually paid during the year. Freestatetaxreturns 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. Freestatetaxreturns If so, you and your spouse can deduct on your separate federal returns the amount you each actually paid. Freestatetaxreturns Joint federal return. Freestatetaxreturns   If you file a joint federal return, you can deduct the total of the state and local income taxes both of you paid. Freestatetaxreturns Contributions to state benefit funds. Freestatetaxreturns    As an employee, you can deduct mandatory contributions to state benefit funds withheld from your wages that provide protection against loss of wages. Freestatetaxreturns For example, certain states require employees to make contributions to state funds providing disability or unemployment insurance benefits. Freestatetaxreturns Mandatory payments made to the following state benefit funds are deductible as state income taxes on Schedule A (Form 1040), line 5. Freestatetaxreturns Alaska Unemployment Compensation Fund. Freestatetaxreturns California Nonoccupational Disability Benefit Fund. Freestatetaxreturns New Jersey Nonoccupational Disability Benefit Fund. Freestatetaxreturns New Jersey Unemployment Compensation Fund. Freestatetaxreturns New York Nonoccupational Disability Benefit Fund. Freestatetaxreturns Pennsylvania Unemployment Compensation Fund. Freestatetaxreturns Rhode Island Temporary Disability Benefit Fund. Freestatetaxreturns Washington State Supplemental Workmen's Compensation Fund. Freestatetaxreturns    Employee contributions to private or voluntary disability plans are not deductible. Freestatetaxreturns Refund (or credit) of state or local income taxes. Freestatetaxreturns   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. Freestatetaxreturns 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. Freestatetaxreturns If you did not itemize your deductions in the previous year, do not include the refund in income. Freestatetaxreturns 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. Freestatetaxreturns For a discussion of how much to include, see Recoveries in chapter 12. Freestatetaxreturns 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. Freestatetaxreturns S. Freestatetaxreturns possession. Freestatetaxreturns However, you cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Freestatetaxreturns S. Freestatetaxreturns tax under the foreign earned income exclusion or the foreign housing exclusion. Freestatetaxreturns For information on these exclusions, see Publication 54, Tax Guide for U. Freestatetaxreturns S. Freestatetaxreturns Citizens and Resident Aliens Abroad. Freestatetaxreturns For information on the foreign tax credit, see Publication 514. Freestatetaxreturns 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. Freestatetaxreturns You can use either your actual expenses or the state and local sales tax tables to figure your sales tax deduction. Freestatetaxreturns Actual expenses. Freestatetaxreturns   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. Freestatetaxreturns 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. Freestatetaxreturns 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. Freestatetaxreturns If you use the actual expenses method, you must have receipts to show the general sales taxes paid. Freestatetaxreturns Do not include sales taxes paid on items used in your trade or business. Freestatetaxreturns Motor vehicles. Freestatetaxreturns   For purposes of this section, motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Freestatetaxreturns This also includes sales taxes on a leased motor vehicle, but not on vehicles used in your trade or business. Freestatetaxreturns Optional sales tax tables. Freestatetaxreturns   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). Freestatetaxreturns You may also be able to add the state and local general sales taxes paid on certain specified items. Freestatetaxreturns   Your applicable table amount is based on the state where you live, your income, and the number of exemptions claimed on your tax return. Freestatetaxreturns Your income is your adjusted gross income plus any nontaxable items such as the following. Freestatetaxreturns Tax-exempt interest. Freestatetaxreturns Veterans' benefits. Freestatetaxreturns Nontaxable combat pay. Freestatetaxreturns Workers' compensation. Freestatetaxreturns Nontaxable part of social security and railroad retirement benefits. Freestatetaxreturns Nontaxable part of IRA, pension, or annuity distributions, excluding rollovers. Freestatetaxreturns Public assistance payments. Freestatetaxreturns 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. Freestatetaxreturns See the Instructions for Schedule A (Form 1040), line 5, for details. Freestatetaxreturns Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real property levied for the general public welfare. Freestatetaxreturns 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. Freestatetaxreturns Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Freestatetaxreturns 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. Freestatetaxreturns For more information about taxes and charges that are not deductible, see Real Estate-Related Items You Cannot Deduct , later. Freestatetaxreturns Tenant-shareholders in a cooperative housing corporation. Freestatetaxreturns   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. Freestatetaxreturns The corporation should provide you with a statement showing your share of the taxes. Freestatetaxreturns For more information, see Special Rules for Cooperatives in Publication 530. Freestatetaxreturns Division of real estate taxes between buyers and sellers. Freestatetaxreturns   If you bought or sold real estate during the year, the real estate taxes must be divided between the buyer and the seller. Freestatetaxreturns   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. Freestatetaxreturns The seller is treated as paying the taxes up to, but not including, the date of sale. Freestatetaxreturns The buyer is treated as paying the taxes beginning with the date of sale. Freestatetaxreturns This applies regardless of the lien dates under local law. Freestatetaxreturns Generally, this information is included on the settlement statement provided at the closing. Freestatetaxreturns    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. Freestatetaxreturns This lets you deduct the part of the tax to the date of sale even though you did not actually pay it. Freestatetaxreturns However, you must also include the amount of that tax in the selling price of the property. Freestatetaxreturns The buyer must include the same amount in his or her cost of the property. Freestatetaxreturns   You figure your deduction for taxes on each property bought or sold during the real property tax year as follows. Freestatetaxreturns Worksheet 22-1. Freestatetaxreturns Figuring Your Real Estate Tax Deduction 1. Freestatetaxreturns Enter the total real estate taxes for the real property tax year   2. Freestatetaxreturns Enter the number of days in the real property tax year that you owned the property   3. Freestatetaxreturns Divide line 2 by 365 (for leap years, divide line 2 by 366) . Freestatetaxreturns 4. Freestatetaxreturns Multiply line 1 by line 3. Freestatetaxreturns This is your deduction. Freestatetaxreturns Enter it on Schedule A (Form 1040), line 6   Note. Freestatetaxreturns Repeat steps 1 through 4 for each property you bought or sold during the real property tax year. Freestatetaxreturns Your total deduction is the sum of the line 4 amounts for all of the properties. Freestatetaxreturns Real estate taxes for prior years. Freestatetaxreturns   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. Freestatetaxreturns Even if the buyer agrees to pay the delinquent taxes, the buyer cannot deduct them. Freestatetaxreturns The buyer must add them to the cost of the property. Freestatetaxreturns The seller can deduct these taxes paid by the buyer. Freestatetaxreturns However, the seller must include them in the selling price. Freestatetaxreturns Examples. Freestatetaxreturns   The following examples illustrate how real estate taxes are divided between buyer and seller. Freestatetaxreturns Example 1. Freestatetaxreturns 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. Freestatetaxreturns The tax on their old home, sold on May 7, was $620. Freestatetaxreturns The tax on their new home, bought on May 3, was $732. Freestatetaxreturns 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. Freestatetaxreturns 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. Freestatetaxreturns 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). Freestatetaxreturns They figure their deduction for taxes on their old home as follows. Freestatetaxreturns Worksheet 22-1. Freestatetaxreturns Figuring Your Real Estate Tax Deduction — Taxes on Old Home 1. Freestatetaxreturns Enter the total real estate taxes for the real property tax year $620 2. Freestatetaxreturns Enter the number of days in the real property tax year that you owned the property 126 3. Freestatetaxreturns Divide line 2 by 365 (for leap years, divide line 2 by 366) . Freestatetaxreturns 3452 4. Freestatetaxreturns Multiply line 1 by line 3. Freestatetaxreturns This is your deduction. Freestatetaxreturns 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. Freestatetaxreturns (The buyers add the $214 to their cost of the home. Freestatetaxreturns ) 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). Freestatetaxreturns They figure their deduction for taxes on their new home as follows. Freestatetaxreturns Worksheet 22-1. Freestatetaxreturns Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Freestatetaxreturns Enter the total real estate taxes for the real property tax year $732 2. Freestatetaxreturns Enter the number of days in the real property tax year that you owned the property 243 3. Freestatetaxreturns Divide line 2 by 365 (for leap years, divide line 2 by 366) . Freestatetaxreturns 6658 4. Freestatetaxreturns Multiply line 1 by line 3. Freestatetaxreturns This is your deduction. Freestatetaxreturns 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. Freestatetaxreturns (The sellers add this $245 to their selling price and deduct the $245 as a real estate tax. Freestatetaxreturns ) Dennis and Beth's real estate tax deduction for their old and new homes is the sum of $214 and $487, or $701. Freestatetaxreturns They will enter this amount on Schedule A (Form 1040), line 6. Freestatetaxreturns Example 2. Freestatetaxreturns George and Helen Brown bought a new home on May 3, 2013. Freestatetaxreturns Their real property tax year for the new home is the calendar year. Freestatetaxreturns Real estate taxes for 2012 were assessed in their state on January 1, 2013. Freestatetaxreturns The taxes became due on May 31, 2013, and October 31, 2013. Freestatetaxreturns The Browns agreed to pay all taxes due after the date of purchase. Freestatetaxreturns Real estate taxes for 2012 were $680. Freestatetaxreturns They paid $340 on May 31, 2013, and $340 on October 31, 2013. Freestatetaxreturns These taxes were for the 2012 real property tax year. Freestatetaxreturns The Browns cannot deduct them since they did not own the property until 2013. Freestatetaxreturns Instead, they must add $680 to the cost of their new home. Freestatetaxreturns In January 2014, the Browns receive their 2013 property tax statement for $752, which they will pay in 2014. Freestatetaxreturns The Browns owned their new home during the 2013 real property tax year for 243 days (May 3 to December 31). Freestatetaxreturns They will figure their 2014 deduction for taxes as follows. Freestatetaxreturns Worksheet 22-1. Freestatetaxreturns Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Freestatetaxreturns Enter the total real estate taxes for the real property tax year $752 2. Freestatetaxreturns Enter the number of days in the real property tax year that you owned the property 243 3. Freestatetaxreturns Divide line 2 by 365 (for leap years, divide line 2 by 366) . Freestatetaxreturns 6658 4. Freestatetaxreturns Multiply line 1 by line 3. Freestatetaxreturns This is your deduction. Freestatetaxreturns 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. Freestatetaxreturns 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. Freestatetaxreturns This is the sum of the $680 for 2012 and the $251 for the 122 days the seller owned the home in 2013. Freestatetaxreturns The seller must also include the $931 in the selling price when he or she figures the gain or loss on the sale. Freestatetaxreturns The seller should contact the Browns in January 2014 to find out how much real estate tax is due for 2013. Freestatetaxreturns Form 1099-S. Freestatetaxreturns   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. Freestatetaxreturns 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. Freestatetaxreturns 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. Freestatetaxreturns   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. Freestatetaxreturns 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. Freestatetaxreturns See Refund (or rebate) , later. Freestatetaxreturns Taxes placed in escrow. Freestatetaxreturns   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. Freestatetaxreturns You can deduct only the real estate tax that the third party actually paid to the taxing authority. Freestatetaxreturns 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. Freestatetaxreturns Tenants by the entirety. Freestatetaxreturns   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. Freestatetaxreturns Divorced individuals. Freestatetaxreturns   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. Freestatetaxreturns See Taxes and insurance in chapter 18 for more information. Freestatetaxreturns Ministers' and military housing allowances. Freestatetaxreturns   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. Freestatetaxreturns Refund (or rebate). Freestatetaxreturns   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. Freestatetaxreturns 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. Freestatetaxreturns However, the amount you include in income is limited to the amount of the deduction that reduced your tax in the earlier year. Freestatetaxreturns For more information, see Recoveries in chapter 12. Freestatetaxreturns Table 22-1. Freestatetaxreturns 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. Freestatetaxreturns 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 ). Freestatetaxreturns     Fines and penalties. Freestatetaxreturns Income Taxes State and local income taxes. Freestatetaxreturns Federal income taxes. Freestatetaxreturns   Foreign income taxes. Freestatetaxreturns     Employee contributions to state funds listed under Contributions to state benefit funds . Freestatetaxreturns Employee contributions to private or voluntary disability plans. Freestatetaxreturns     State and local general sales taxes if you choose to deduct state and local income taxes. Freestatetaxreturns General Sales Taxes State and local general sales taxes, including compensating use taxes. Freestatetaxreturns State and local income taxes if you choose to deduct state and local general sales taxes. Freestatetaxreturns Other Taxes Taxes that are expenses of your trade or business. Freestatetaxreturns Federal excise taxes, such as tax on gasoline, that are not expenses of your trade or business or of producing income. Freestatetaxreturns   Taxes on property producing rent or royalty income. Freestatetaxreturns Per capita taxes. Freestatetaxreturns   Occupational taxes. Freestatetaxreturns See chapter 28. Freestatetaxreturns     One-half of self-employment tax paid. Freestatetaxreturns   Personal Property Taxes State and local personal property taxes. Freestatetaxreturns Customs duties that are not expenses of your trade or business or of producing income. Freestatetaxreturns Real Estate Taxes State and local real estate taxes. Freestatetaxreturns Real estate taxes that are treated as imposed on someone else (see Division of real estate taxes between buyers and sellers ). Freestatetaxreturns   Foreign real estate taxes. Freestatetaxreturns Taxes for local benefits (with exceptions). Freestatetaxreturns See Real Estate-Related Items You Cannot Deduct . Freestatetaxreturns   Tenant's share of real estate taxes paid by  cooperative housing corporation. Freestatetaxreturns Trash and garbage pickup fees (with exceptions). Freestatetaxreturns See Real Estate-Related Items You Cannot Deduct . Freestatetaxreturns     Rent increase due to higher real estate taxes. Freestatetaxreturns     Homeowners' association charges. Freestatetaxreturns Real Estate-Related Items You Cannot Deduct Payments for the following items generally are not deductible as real estate taxes. Freestatetaxreturns Taxes for local benefits. Freestatetaxreturns Itemized charges for services (such as trash and garbage pickup fees). Freestatetaxreturns Transfer taxes (or stamp taxes). Freestatetaxreturns Rent increases due to higher real estate taxes. Freestatetaxreturns Homeowners' association charges. Freestatetaxreturns Taxes for local benefits. Freestatetaxreturns   Deductible real estate taxes generally do not include taxes charged for local benefits and improvements tending to increase the value of your property. Freestatetaxreturns These include assessments for streets, sidewalks, water mains, sewer lines, public parking facilities, and similar improvements. Freestatetaxreturns You should increase the basis of your property by the amount of the assessment. Freestatetaxreturns   Local benefit taxes are deductible only if they are for maintenance, repair, or interest charges related to those benefits. Freestatetaxreturns 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. Freestatetaxreturns If you cannot determine what part of the tax is for maintenance, repair, or interest, none of it is deductible. Freestatetaxreturns    Taxes for local benefits may be included in your real estate tax bill. Freestatetaxreturns If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Freestatetaxreturns You should use the rules above to determine if the local benefit tax is deductible. Freestatetaxreturns Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Freestatetaxreturns Itemized charges for services. Freestatetaxreturns    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. Freestatetaxreturns 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). Freestatetaxreturns    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. Freestatetaxreturns If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Freestatetaxreturns Exception. Freestatetaxreturns   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. Freestatetaxreturns Transfer taxes (or stamp taxes). Freestatetaxreturns   Transfer taxes and similar taxes and charges on the sale of a personal home are not deductible. Freestatetaxreturns If they are paid by the seller, they are expenses of the sale and reduce the amount realized on the sale. Freestatetaxreturns If paid by the buyer, they are included in the cost basis of the property. Freestatetaxreturns Rent increase due to higher real estate taxes. Freestatetaxreturns   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. Freestatetaxreturns Homeowners' association charges. Freestatetaxreturns   These charges are not deductible because they are imposed by the homeowners' association, rather than the state or local government. Freestatetaxreturns 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. Freestatetaxreturns A tax that meets the above requirements can be considered charged on personal property even if it is for the exercise of a privilege. Freestatetaxreturns 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. Freestatetaxreturns If the tax is partly based on value and partly based on other criteria, it may qualify in part. Freestatetaxreturns Example. Freestatetaxreturns Your state charges a yearly motor vehicle registration tax of 1% of value plus 50 cents per hundredweight. Freestatetaxreturns You paid $32 based on the value ($1,500) and weight (3,400 lbs. Freestatetaxreturns ) of your car. Freestatetaxreturns You can deduct $15 (1% × $1,500) as a personal property tax because it is based on the value. Freestatetaxreturns The remaining $17 ($. Freestatetaxreturns 50 × 34), based on the weight, is not deductible. Freestatetaxreturns 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. Freestatetaxreturns Other taxes and fees, such as federal income taxes, are not deductible because the tax law specifically prohibits a deduction for them. Freestatetaxreturns See Table 22-1. Freestatetaxreturns Taxes and fees that are generally not deductible include the following items. Freestatetaxreturns Employment taxes. Freestatetaxreturns This includes social security, Medicare, and railroad retirement taxes withheld from your pay. Freestatetaxreturns However, one-half of self-employment tax you pay is deductible. Freestatetaxreturns 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. Freestatetaxreturns For more information, see chapters 21 and 32. Freestatetaxreturns Estate, inheritance, legacy, or succession taxes. Freestatetaxreturns 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. Freestatetaxreturns In that case, deduct the estate tax as a miscellaneous deduction that is not subject to the 2%-of-adjusted-gross-income limit. Freestatetaxreturns For more information, see Publication 559, Survivors, Executors, and Administrators. Freestatetaxreturns Federal income taxes. Freestatetaxreturns This includes income taxes withheld from your pay. Freestatetaxreturns Fines and penalties. Freestatetaxreturns You cannot deduct fines and penalties paid to a government for violation of any law, including related amounts forfeited as collateral deposits. Freestatetaxreturns Gift taxes. Freestatetaxreturns License fees. Freestatetaxreturns You cannot deduct license fees for personal purposes (such as marriage, driver's, and dog license fees). Freestatetaxreturns Per capita taxes. Freestatetaxreturns You cannot deduct state or local per capita taxes. Freestatetaxreturns 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. Freestatetaxreturns For other nondeductible items, see Real Estate-Related Items You Cannot Deduct , earlier. Freestatetaxreturns Where To Deduct You deduct taxes on the following schedules. Freestatetaxreturns State and local income taxes. Freestatetaxreturns    These taxes are deducted on Schedule A (Form 1040), line 5, even if your only source of income is from business, rents, or royalties. Freestatetaxreturns Check box a on line 5. Freestatetaxreturns General sales taxes. Freestatetaxreturns   Sales taxes are deducted on Schedule A (Form 1040), line 5. Freestatetaxreturns You must check box b on line 5. Freestatetaxreturns If you elect to deduct sales taxes, you cannot deduct state and local income taxes on Schedule A (Form 1040), line 5, box a. Freestatetaxreturns Foreign income taxes. Freestatetaxreturns   Generally, income taxes you pay to a foreign country or U. Freestatetaxreturns S. Freestatetaxreturns possession can be claimed as an itemized deduction on Schedule A (Form 1040), line 8, or as a credit against your U. Freestatetaxreturns S. Freestatetaxreturns income tax on Form 1040, line 47. Freestatetaxreturns To claim the credit, you may have to complete and attach Form 1116. Freestatetaxreturns For more information, see chapter 37, the Form 1040 instructions, or Publication 514. Freestatetaxreturns Real estate taxes and personal property taxes. Freestatetaxreturns    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). Freestatetaxreturns Taxes on property that produces rent or royalty income are deducted on Schedule E (Form 1040). Freestatetaxreturns Self-employment tax. Freestatetaxreturns    Deduct one-half of your self-employment tax on Form 1040, line 27. Freestatetaxreturns Other taxes. Freestatetaxreturns    All other deductible taxes are deducted on Schedule A (Form 1040), line 8. Freestatetaxreturns Prev  Up  Next   Home   More Online Publications