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Aarp tax help locations Publication 575 - Additional Material Table of Contents Worksheet A. Aarp tax help locations Simplified Method 1. Aarp tax help locations Enter the total pension or annuity payments received this year. Aarp tax help locations Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Aarp tax help locations   2. Aarp tax help locations Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion. Aarp tax help locations * See Cost (Investment in the Contract) , earlier 2. Aarp tax help locations   Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Aarp tax help locations Otherwise, go to line 3. Aarp tax help locations   3. Aarp tax help locations Enter the appropriate number from Table 1 below. Aarp tax help locations But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below. Aarp tax help locations 3. Aarp tax help locations   4. Aarp tax help locations Divide line 2 by the number on line 3 4. Aarp tax help locations   5. Aarp tax help locations Multiply line 4 by the number of months for which this year's payments were made. Aarp tax help locations If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Aarp tax help locations Otherwise, go to line 6 5. Aarp tax help locations   6. Aarp tax help locations Enter any amounts previously recovered tax free in years after 1986. Aarp tax help locations This is the amount shown on line 10 of your worksheet for last year 6. Aarp tax help locations   7. Aarp tax help locations Subtract line 6 from line 2 7. Aarp tax help locations   8. Aarp tax help locations Enter the smaller of line 5 or line 7 8. Aarp tax help locations   9. Aarp tax help locations Taxable amount for year. Aarp tax help locations Subtract line 8 from line 1. Aarp tax help locations Enter the result, but not less than zero. Aarp tax help locations Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Aarp tax help locations  Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Aarp tax help locations If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers , earlier, before entering an amount on your tax return 9. Aarp tax help locations   10. Aarp tax help locations Was your annuity starting date before 1987? □ Yes. Aarp tax help locations STOP. Aarp tax help locations Do not complete the rest of this worksheet. Aarp tax help locations  □ No. Aarp tax help locations Add lines 6 and 8. Aarp tax help locations This is the amount you have recovered tax free through 2013. Aarp tax help locations You will need this number if you need to fill out this worksheet next year 10. Aarp tax help locations   11. Aarp tax help locations Balance of cost to be recovered. Aarp tax help locations Subtract line 10 from line 2. Aarp tax help locations If zero, you will not have to complete this worksheet next year. Aarp tax help locations The payments you receive next year will generally be fully taxable 11. Aarp tax help locations   * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Aarp tax help locations Table 1 for Line 3 Above   IF the age at  annuity starting date was . Aarp tax help locations . Aarp tax help locations . Aarp tax help locations         AND your annuity starting date was—     BEFORE November 19, 1996,  enter on line 3 . Aarp tax help locations . Aarp tax help locations . Aarp tax help locations AFTER November 18, 1996,  enter on line 3 . Aarp tax help locations . Aarp tax help locations . Aarp tax help locations   55 or under 300 360   56-60 260 310   61-65 240 260   66-70 170 210   71 or over 120 160 Table 2 for Line 3 Above   IF the combined ages at annuity starting date were . Aarp tax help locations . Aarp tax help locations . Aarp tax help locations   THEN enter on line 3 . Aarp tax help locations . Aarp tax help locations . Aarp tax help locations         110 or under   410         111-120   360         121-130   310         131-140   260         141 or over   210       Prev  Up  Next   Home   More Online Publications
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Aarp tax help locations 22. Aarp tax help locations   Taxes Table of Contents IntroductionIndian tribal government. Aarp tax help locations 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. Aarp tax help locations Real Estate TaxesReal estate taxes for prior years. Aarp tax help locations Examples. Aarp tax help locations Form 1099-S. Aarp tax help locations 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). Aarp tax help locations It also explains which taxes you can deduct on other schedules or forms and which taxes you cannot deduct. Aarp tax help locations This chapter covers the following topics. Aarp tax help locations Income taxes (federal, state, local, and foreign). Aarp tax help locations General sales taxes (state and local). Aarp tax help locations Real estate taxes (state, local, and foreign). Aarp tax help locations Personal property taxes (state and local). Aarp tax help locations Taxes and fees you cannot deduct. Aarp tax help locations Use Table 22-1 as a guide to determine which taxes you can deduct. Aarp tax help locations The end of the chapter contains a section that explains which forms you use to deduct different types of taxes. Aarp tax help locations Business taxes. Aarp tax help locations   You can deduct certain taxes only if they are ordinary and necessary expenses of your trade or business or of producing income. Aarp tax help locations For information on these taxes, see Publication 535, Business Expenses. Aarp tax help locations State or local taxes. Aarp tax help locations   These are taxes imposed by the 50 states, U. Aarp tax help locations S. Aarp tax help locations possessions, or any of their political subdivisions (such as a county or city), or by the District of Columbia. Aarp tax help locations Indian tribal government. Aarp tax help locations   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. Aarp tax help locations 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. Aarp tax help locations General sales taxes. Aarp tax help locations   These are taxes imposed at one rate on retail sales of a broad range of classes of items. Aarp tax help locations Foreign taxes. Aarp tax help locations   These are taxes imposed by a foreign country or any of its political subdivisions. Aarp tax help locations 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. Aarp tax help locations The tax must be imposed on you. Aarp tax help locations You must pay the tax during your tax year. Aarp tax help locations The tax must be imposed on you. Aarp tax help locations   In general, you can deduct only taxes imposed on you. Aarp tax help locations   Generally, you can deduct property taxes only if you are an owner of the property. Aarp tax help locations 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. Aarp tax help locations You must pay the tax during your tax year. Aarp tax help locations   If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during your tax year. Aarp tax help locations 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. Aarp tax help locations 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. Aarp tax help locations 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). Aarp tax help locations See Publication 538, Accounting Periods and Methods, for details. Aarp tax help locations    If you use an accrual method of accounting, see Publication 538 for more information. Aarp tax help locations Income Taxes This section discusses the deductibility of state and local income taxes (including employee contributions to state benefit funds) and foreign income taxes. Aarp tax help locations State and Local Income Taxes You can deduct state and local income taxes. Aarp tax help locations However, you can elect to deduct state and local general sales taxes instead of state and local income taxes. Aarp tax help locations See General Sales Taxes , later. Aarp tax help locations Exception. Aarp tax help locations    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. Aarp tax help locations 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. Aarp tax help locations What To Deduct Your deduction may be for withheld taxes, estimated tax payments, or other tax payments as follows. Aarp tax help locations Withheld taxes. Aarp tax help locations   You can deduct state and local income taxes withheld from your salary in the year they are withheld. Aarp tax help locations Your Form(s) W-2 will show these amounts. Aarp tax help locations Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld. Aarp tax help locations Estimated tax payments. Aarp tax help locations   You can deduct estimated tax payments you made during the year to a state or local government. Aarp tax help locations However, you must have a reasonable basis for making the estimated tax payments. Aarp tax help locations Any estimated state or local tax payments that are not made in good faith at the time of payment are not deductible. Aarp tax help locations For example, you made an estimated state income tax payment. Aarp tax help locations However, the estimate of your state tax liability shows that you will get a refund of the full amount of your estimated payment. Aarp tax help locations You had no reasonable basis to believe you had any additional liability for state income taxes and you cannot deduct the estimated tax payment. Aarp tax help locations Refund applied to taxes. Aarp tax help locations   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. Aarp tax help locations    Do not reduce your deduction by either of the following items. Aarp tax help locations Any state or local income tax refund (or credit) you expect to receive for 2013. Aarp tax help locations Any refund of (or credit for) prior-year state and local income taxes you actually received in 2013. Aarp tax help locations   However, part or all of this refund (or credit) may be taxable. Aarp tax help locations See Refund (or credit) of state or local income taxes , later. Aarp tax help locations Separate federal returns. Aarp tax help locations   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. Aarp tax help locations Joint state and local returns. Aarp tax help locations   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. Aarp tax help locations 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. Aarp tax help locations However, you cannot deduct more than the amount you actually paid during the year. Aarp tax help locations 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. Aarp tax help locations If so, you and your spouse can deduct on your separate federal returns the amount you each actually paid. Aarp tax help locations Joint federal return. Aarp tax help locations   If you file a joint federal return, you can deduct the total of the state and local income taxes both of you paid. Aarp tax help locations Contributions to state benefit funds. Aarp tax help locations    As an employee, you can deduct mandatory contributions to state benefit funds withheld from your wages that provide protection against loss of wages. Aarp tax help locations For example, certain states require employees to make contributions to state funds providing disability or unemployment insurance benefits. Aarp tax help locations Mandatory payments made to the following state benefit funds are deductible as state income taxes on Schedule A (Form 1040), line 5. Aarp tax help locations Alaska Unemployment Compensation Fund. Aarp tax help locations California Nonoccupational Disability Benefit Fund. Aarp tax help locations New Jersey Nonoccupational Disability Benefit Fund. Aarp tax help locations New Jersey Unemployment Compensation Fund. Aarp tax help locations New York Nonoccupational Disability Benefit Fund. Aarp tax help locations Pennsylvania Unemployment Compensation Fund. Aarp tax help locations Rhode Island Temporary Disability Benefit Fund. Aarp tax help locations Washington State Supplemental Workmen's Compensation Fund. Aarp tax help locations    Employee contributions to private or voluntary disability plans are not deductible. Aarp tax help locations Refund (or credit) of state or local income taxes. Aarp tax help locations   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. Aarp tax help locations 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. Aarp tax help locations If you did not itemize your deductions in the previous year, do not include the refund in income. Aarp tax help locations 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. Aarp tax help locations For a discussion of how much to include, see Recoveries in chapter 12. Aarp tax help locations 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. Aarp tax help locations S. Aarp tax help locations possession. Aarp tax help locations However, you cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Aarp tax help locations S. Aarp tax help locations tax under the foreign earned income exclusion or the foreign housing exclusion. Aarp tax help locations For information on these exclusions, see Publication 54, Tax Guide for U. Aarp tax help locations S. Aarp tax help locations Citizens and Resident Aliens Abroad. Aarp tax help locations For information on the foreign tax credit, see Publication 514. Aarp tax help locations 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. Aarp tax help locations You can use either your actual expenses or the state and local sales tax tables to figure your sales tax deduction. Aarp tax help locations Actual expenses. Aarp tax help locations   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. Aarp tax help locations 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. Aarp tax help locations 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. Aarp tax help locations If you use the actual expenses method, you must have receipts to show the general sales taxes paid. Aarp tax help locations Do not include sales taxes paid on items used in your trade or business. Aarp tax help locations Motor vehicles. Aarp tax help locations   For purposes of this section, motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Aarp tax help locations This also includes sales taxes on a leased motor vehicle, but not on vehicles used in your trade or business. Aarp tax help locations Optional sales tax tables. Aarp tax help locations   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). Aarp tax help locations You may also be able to add the state and local general sales taxes paid on certain specified items. Aarp tax help locations   Your applicable table amount is based on the state where you live, your income, and the number of exemptions claimed on your tax return. Aarp tax help locations Your income is your adjusted gross income plus any nontaxable items such as the following. Aarp tax help locations Tax-exempt interest. Aarp tax help locations Veterans' benefits. Aarp tax help locations Nontaxable combat pay. Aarp tax help locations Workers' compensation. Aarp tax help locations Nontaxable part of social security and railroad retirement benefits. Aarp tax help locations Nontaxable part of IRA, pension, or annuity distributions, excluding rollovers. Aarp tax help locations Public assistance payments. Aarp tax help locations 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. Aarp tax help locations See the Instructions for Schedule A (Form 1040), line 5, for details. Aarp tax help locations Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real property levied for the general public welfare. Aarp tax help locations 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. Aarp tax help locations Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Aarp tax help locations 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. Aarp tax help locations For more information about taxes and charges that are not deductible, see Real Estate-Related Items You Cannot Deduct , later. Aarp tax help locations Tenant-shareholders in a cooperative housing corporation. Aarp tax help locations   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. Aarp tax help locations The corporation should provide you with a statement showing your share of the taxes. Aarp tax help locations For more information, see Special Rules for Cooperatives in Publication 530. Aarp tax help locations Division of real estate taxes between buyers and sellers. Aarp tax help locations   If you bought or sold real estate during the year, the real estate taxes must be divided between the buyer and the seller. Aarp tax help locations   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. Aarp tax help locations The seller is treated as paying the taxes up to, but not including, the date of sale. Aarp tax help locations The buyer is treated as paying the taxes beginning with the date of sale. Aarp tax help locations This applies regardless of the lien dates under local law. Aarp tax help locations Generally, this information is included on the settlement statement provided at the closing. Aarp tax help locations    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. Aarp tax help locations This lets you deduct the part of the tax to the date of sale even though you did not actually pay it. Aarp tax help locations However, you must also include the amount of that tax in the selling price of the property. Aarp tax help locations The buyer must include the same amount in his or her cost of the property. Aarp tax help locations   You figure your deduction for taxes on each property bought or sold during the real property tax year as follows. Aarp tax help locations Worksheet 22-1. Aarp tax help locations Figuring Your Real Estate Tax Deduction 1. Aarp tax help locations Enter the total real estate taxes for the real property tax year   2. Aarp tax help locations Enter the number of days in the real property tax year that you owned the property   3. Aarp tax help locations Divide line 2 by 365 (for leap years, divide line 2 by 366) . Aarp tax help locations 4. Aarp tax help locations Multiply line 1 by line 3. Aarp tax help locations This is your deduction. Aarp tax help locations Enter it on Schedule A (Form 1040), line 6   Note. Aarp tax help locations Repeat steps 1 through 4 for each property you bought or sold during the real property tax year. Aarp tax help locations Your total deduction is the sum of the line 4 amounts for all of the properties. Aarp tax help locations Real estate taxes for prior years. Aarp tax help locations   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. Aarp tax help locations Even if the buyer agrees to pay the delinquent taxes, the buyer cannot deduct them. Aarp tax help locations The buyer must add them to the cost of the property. Aarp tax help locations The seller can deduct these taxes paid by the buyer. Aarp tax help locations However, the seller must include them in the selling price. Aarp tax help locations Examples. Aarp tax help locations   The following examples illustrate how real estate taxes are divided between buyer and seller. Aarp tax help locations Example 1. Aarp tax help locations 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. Aarp tax help locations The tax on their old home, sold on May 7, was $620. Aarp tax help locations The tax on their new home, bought on May 3, was $732. Aarp tax help locations 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. Aarp tax help locations 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. Aarp tax help locations 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). Aarp tax help locations They figure their deduction for taxes on their old home as follows. Aarp tax help locations Worksheet 22-1. Aarp tax help locations Figuring Your Real Estate Tax Deduction — Taxes on Old Home 1. Aarp tax help locations Enter the total real estate taxes for the real property tax year $620 2. Aarp tax help locations Enter the number of days in the real property tax year that you owned the property 126 3. Aarp tax help locations Divide line 2 by 365 (for leap years, divide line 2 by 366) . Aarp tax help locations 3452 4. Aarp tax help locations Multiply line 1 by line 3. Aarp tax help locations This is your deduction. Aarp tax help locations 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. Aarp tax help locations (The buyers add the $214 to their cost of the home. Aarp tax help locations ) 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). Aarp tax help locations They figure their deduction for taxes on their new home as follows. Aarp tax help locations Worksheet 22-1. Aarp tax help locations Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Aarp tax help locations Enter the total real estate taxes for the real property tax year $732 2. Aarp tax help locations Enter the number of days in the real property tax year that you owned the property 243 3. Aarp tax help locations Divide line 2 by 365 (for leap years, divide line 2 by 366) . Aarp tax help locations 6658 4. Aarp tax help locations Multiply line 1 by line 3. Aarp tax help locations This is your deduction. Aarp tax help locations 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. Aarp tax help locations (The sellers add this $245 to their selling price and deduct the $245 as a real estate tax. Aarp tax help locations ) Dennis and Beth's real estate tax deduction for their old and new homes is the sum of $214 and $487, or $701. Aarp tax help locations They will enter this amount on Schedule A (Form 1040), line 6. Aarp tax help locations Example 2. Aarp tax help locations George and Helen Brown bought a new home on May 3, 2013. Aarp tax help locations Their real property tax year for the new home is the calendar year. Aarp tax help locations Real estate taxes for 2012 were assessed in their state on January 1, 2013. Aarp tax help locations The taxes became due on May 31, 2013, and October 31, 2013. Aarp tax help locations The Browns agreed to pay all taxes due after the date of purchase. Aarp tax help locations Real estate taxes for 2012 were $680. Aarp tax help locations They paid $340 on May 31, 2013, and $340 on October 31, 2013. Aarp tax help locations These taxes were for the 2012 real property tax year. Aarp tax help locations The Browns cannot deduct them since they did not own the property until 2013. Aarp tax help locations Instead, they must add $680 to the cost of their new home. Aarp tax help locations In January 2014, the Browns receive their 2013 property tax statement for $752, which they will pay in 2014. Aarp tax help locations The Browns owned their new home during the 2013 real property tax year for 243 days (May 3 to December 31). Aarp tax help locations They will figure their 2014 deduction for taxes as follows. Aarp tax help locations Worksheet 22-1. Aarp tax help locations Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Aarp tax help locations Enter the total real estate taxes for the real property tax year $752 2. Aarp tax help locations Enter the number of days in the real property tax year that you owned the property 243 3. Aarp tax help locations Divide line 2 by 365 (for leap years, divide line 2 by 366) . Aarp tax help locations 6658 4. Aarp tax help locations Multiply line 1 by line 3. Aarp tax help locations This is your deduction. Aarp tax help locations 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. Aarp tax help locations 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. Aarp tax help locations This is the sum of the $680 for 2012 and the $251 for the 122 days the seller owned the home in 2013. Aarp tax help locations The seller must also include the $931 in the selling price when he or she figures the gain or loss on the sale. Aarp tax help locations The seller should contact the Browns in January 2014 to find out how much real estate tax is due for 2013. Aarp tax help locations Form 1099-S. Aarp tax help locations   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. Aarp tax help locations 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. Aarp tax help locations 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. Aarp tax help locations   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. Aarp tax help locations 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. Aarp tax help locations See Refund (or rebate) , later. Aarp tax help locations Taxes placed in escrow. Aarp tax help locations   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. Aarp tax help locations You can deduct only the real estate tax that the third party actually paid to the taxing authority. Aarp tax help locations 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. Aarp tax help locations Tenants by the entirety. Aarp tax help locations   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. Aarp tax help locations Divorced individuals. Aarp tax help locations   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. Aarp tax help locations See Taxes and insurance in chapter 18 for more information. Aarp tax help locations Ministers' and military housing allowances. Aarp tax help locations   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. Aarp tax help locations Refund (or rebate). Aarp tax help locations   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. Aarp tax help locations 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. Aarp tax help locations However, the amount you include in income is limited to the amount of the deduction that reduced your tax in the earlier year. Aarp tax help locations For more information, see Recoveries in chapter 12. Aarp tax help locations Table 22-1. Aarp tax help locations 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. Aarp tax help locations 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 ). Aarp tax help locations     Fines and penalties. Aarp tax help locations Income Taxes State and local income taxes. Aarp tax help locations Federal income taxes. Aarp tax help locations   Foreign income taxes. Aarp tax help locations     Employee contributions to state funds listed under Contributions to state benefit funds . Aarp tax help locations Employee contributions to private or voluntary disability plans. Aarp tax help locations     State and local general sales taxes if you choose to deduct state and local income taxes. Aarp tax help locations General Sales Taxes State and local general sales taxes, including compensating use taxes. Aarp tax help locations State and local income taxes if you choose to deduct state and local general sales taxes. Aarp tax help locations Other Taxes Taxes that are expenses of your trade or business. Aarp tax help locations Federal excise taxes, such as tax on gasoline, that are not expenses of your trade or business or of producing income. Aarp tax help locations   Taxes on property producing rent or royalty income. Aarp tax help locations Per capita taxes. Aarp tax help locations   Occupational taxes. Aarp tax help locations See chapter 28. Aarp tax help locations     One-half of self-employment tax paid. Aarp tax help locations   Personal Property Taxes State and local personal property taxes. Aarp tax help locations Customs duties that are not expenses of your trade or business or of producing income. Aarp tax help locations Real Estate Taxes State and local real estate taxes. Aarp tax help locations Real estate taxes that are treated as imposed on someone else (see Division of real estate taxes between buyers and sellers ). Aarp tax help locations   Foreign real estate taxes. Aarp tax help locations Taxes for local benefits (with exceptions). Aarp tax help locations See Real Estate-Related Items You Cannot Deduct . Aarp tax help locations   Tenant's share of real estate taxes paid by  cooperative housing corporation. Aarp tax help locations Trash and garbage pickup fees (with exceptions). Aarp tax help locations See Real Estate-Related Items You Cannot Deduct . Aarp tax help locations     Rent increase due to higher real estate taxes. Aarp tax help locations     Homeowners' association charges. Aarp tax help locations Real Estate-Related Items You Cannot Deduct Payments for the following items generally are not deductible as real estate taxes. Aarp tax help locations Taxes for local benefits. Aarp tax help locations Itemized charges for services (such as trash and garbage pickup fees). Aarp tax help locations Transfer taxes (or stamp taxes). Aarp tax help locations Rent increases due to higher real estate taxes. Aarp tax help locations Homeowners' association charges. Aarp tax help locations Taxes for local benefits. Aarp tax help locations   Deductible real estate taxes generally do not include taxes charged for local benefits and improvements tending to increase the value of your property. Aarp tax help locations These include assessments for streets, sidewalks, water mains, sewer lines, public parking facilities, and similar improvements. Aarp tax help locations You should increase the basis of your property by the amount of the assessment. Aarp tax help locations   Local benefit taxes are deductible only if they are for maintenance, repair, or interest charges related to those benefits. Aarp tax help locations 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. Aarp tax help locations If you cannot determine what part of the tax is for maintenance, repair, or interest, none of it is deductible. Aarp tax help locations    Taxes for local benefits may be included in your real estate tax bill. Aarp tax help locations If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Aarp tax help locations You should use the rules above to determine if the local benefit tax is deductible. Aarp tax help locations Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Aarp tax help locations Itemized charges for services. Aarp tax help locations    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. Aarp tax help locations 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). Aarp tax help locations    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. Aarp tax help locations If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Aarp tax help locations Exception. Aarp tax help locations   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. Aarp tax help locations Transfer taxes (or stamp taxes). Aarp tax help locations   Transfer taxes and similar taxes and charges on the sale of a personal home are not deductible. Aarp tax help locations If they are paid by the seller, they are expenses of the sale and reduce the amount realized on the sale. Aarp tax help locations If paid by the buyer, they are included in the cost basis of the property. Aarp tax help locations Rent increase due to higher real estate taxes. Aarp tax help locations   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. Aarp tax help locations Homeowners' association charges. Aarp tax help locations   These charges are not deductible because they are imposed by the homeowners' association, rather than the state or local government. Aarp tax help locations 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. Aarp tax help locations A tax that meets the above requirements can be considered charged on personal property even if it is for the exercise of a privilege. Aarp tax help locations 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. Aarp tax help locations If the tax is partly based on value and partly based on other criteria, it may qualify in part. Aarp tax help locations Example. Aarp tax help locations Your state charges a yearly motor vehicle registration tax of 1% of value plus 50 cents per hundredweight. Aarp tax help locations You paid $32 based on the value ($1,500) and weight (3,400 lbs. Aarp tax help locations ) of your car. Aarp tax help locations You can deduct $15 (1% × $1,500) as a personal property tax because it is based on the value. Aarp tax help locations The remaining $17 ($. Aarp tax help locations 50 × 34), based on the weight, is not deductible. Aarp tax help locations 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. Aarp tax help locations Other taxes and fees, such as federal income taxes, are not deductible because the tax law specifically prohibits a deduction for them. Aarp tax help locations See Table 22-1. Aarp tax help locations Taxes and fees that are generally not deductible include the following items. Aarp tax help locations Employment taxes. Aarp tax help locations This includes social security, Medicare, and railroad retirement taxes withheld from your pay. Aarp tax help locations However, one-half of self-employment tax you pay is deductible. Aarp tax help locations 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. Aarp tax help locations For more information, see chapters 21 and 32. Aarp tax help locations Estate, inheritance, legacy, or succession taxes. Aarp tax help locations 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. Aarp tax help locations In that case, deduct the estate tax as a miscellaneous deduction that is not subject to the 2%-of-adjusted-gross-income limit. Aarp tax help locations For more information, see Publication 559, Survivors, Executors, and Administrators. Aarp tax help locations Federal income taxes. Aarp tax help locations This includes income taxes withheld from your pay. Aarp tax help locations Fines and penalties. Aarp tax help locations You cannot deduct fines and penalties paid to a government for violation of any law, including related amounts forfeited as collateral deposits. Aarp tax help locations Gift taxes. Aarp tax help locations License fees. Aarp tax help locations You cannot deduct license fees for personal purposes (such as marriage, driver's, and dog license fees). Aarp tax help locations Per capita taxes. Aarp tax help locations You cannot deduct state or local per capita taxes. Aarp tax help locations 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. Aarp tax help locations For other nondeductible items, see Real Estate-Related Items You Cannot Deduct , earlier. Aarp tax help locations Where To Deduct You deduct taxes on the following schedules. Aarp tax help locations State and local income taxes. Aarp tax help locations    These taxes are deducted on Schedule A (Form 1040), line 5, even if your only source of income is from business, rents, or royalties. Aarp tax help locations Check box a on line 5. Aarp tax help locations General sales taxes. Aarp tax help locations   Sales taxes are deducted on Schedule A (Form 1040), line 5. Aarp tax help locations You must check box b on line 5. Aarp tax help locations If you elect to deduct sales taxes, you cannot deduct state and local income taxes on Schedule A (Form 1040), line 5, box a. Aarp tax help locations Foreign income taxes. Aarp tax help locations   Generally, income taxes you pay to a foreign country or U. Aarp tax help locations S. Aarp tax help locations possession can be claimed as an itemized deduction on Schedule A (Form 1040), line 8, or as a credit against your U. Aarp tax help locations S. Aarp tax help locations income tax on Form 1040, line 47. Aarp tax help locations To claim the credit, you may have to complete and attach Form 1116. Aarp tax help locations For more information, see chapter 37, the Form 1040 instructions, or Publication 514. Aarp tax help locations Real estate taxes and personal property taxes. Aarp tax help locations    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). Aarp tax help locations Taxes on property that produces rent or royalty income are deducted on Schedule E (Form 1040). Aarp tax help locations Self-employment tax. Aarp tax help locations    Deduct one-half of your self-employment tax on Form 1040, line 27. Aarp tax help locations Other taxes. Aarp tax help locations    All other deductible taxes are deducted on Schedule A (Form 1040), line 8. 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