When you sell your main home, treat real estate and transfer taxes
on that home as discussed in this section.
Real estate taxes.
You and the buyer must deduct the real estate taxes on your home
for the year of sale according to the number of days in the real
property tax year that each owned the home.
- You are treated as paying the taxes up to, but
not including, the date of sale. You can deduct these taxes as an
itemized deduction on Schedule A (Form 1040) in the year of sale. It
does not matter what part of the taxes you actually paid.
- The buyer is treated as paying the taxes
beginning with the date of sale.
If the buyer paid your share of the taxes (or any delinquent taxes
you owed), the payment increases the selling price of your home. The
buyer adds the amount paid to his or her basis in the property.
Example.
The tax on Dennis and Beth White's home was $620 for the year.
Their real property tax year was the calendar year, with payment due
August 1. They sold the home on May 7. Dennis and Beth are considered
to have paid a proportionate share of the real estate taxes on the
home even though they did not actually pay them to the taxing
authority.
Dennis and Beth owned their home during the real property tax year
for 126 days (January 1 to May 6, the day before the sale). They
figure their deduction for taxes as follows.
| 1. |
Enter the total real estate
taxes for the real property tax year |
$620 |
| 2. |
Enter the number of days in
the real property tax year that you owned the property |
126 |
| 3. |
Divide line 2 by 365 |
.345 |
| 4. |
Multiply line 1 by line 3.
This is your deduction. Enter it on line 6 of Schedule A (Form 1040)
|
$214
|
Since the buyers paid all of the taxes, Dennis and Beth also
include the $214 in the home's selling price. The buyers add the $214
to their basis in the home. The buyers can deduct $406 ($620 - $214),
the taxes for the part of the year they owned the home.
Form 1099-S.
If the person responsible for closing the sale (generally the
settlement agent) must file Form 1099-S, the information
reported on the form to you and the IRS must include (in box 5) the
part of any real estate tax that the buyer can deduct. If you actually
paid the taxes for the year of sale, you must subtract the amount
shown in box 5 of Form 1099-S from the amount you paid. The
result is the amount you can deduct.
More information.
For more information about real estate taxes, see Publication 530.
Transfer taxes.
You cannot deduct transfer taxes, stamp taxes, and other incidental
taxes and charges on the sale of a home as itemized deductions.
However, if you pay these amounts as the seller of the property, they
are expenses of the sale and reduce the amount you realize on the
sale. If you pay these amounts as the buyer, include them in your cost
basis of the property.
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