When you sell your main home, treat real estate and transfer taxes on that home as discussed in this section.taxmap/pubs/p523-007.htm#en_us_publink100027647
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 (the period to which the tax relates) 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.taxmap/pubs/p523-007.htm#en_us_publink100027648
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, 2008. They sold the home on May 7, 2008. 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 2008 real property tax year for 127 days (January 1 to May 6, the day before the sale). They figure their deduction for taxes as follows.
|1.||Total real estate taxes for the real property tax year||$620|
|2.||Number of days in the real property tax year that you owned the property||127|
|3.||Divide line 2 by 366 (365 if not leap year)||.347|
|4.||Multiply line 1 by line 3. This is your deduction. Enter it on line 6 of Schedule A (Form 1040)||$215|
Since the buyers paid all of the taxes, Dennis and Beth also include the $215 in the home's selling price. The buyers add the $215 to their basis in the home. The buyers can deduct $405 ($620 – $215) as an itemized deduction, the taxes for the part of the year they owned the home.
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 charged to the buyer. 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 as an itemized deduction.taxmap/pubs/p523-007.htm#en_us_publink100027650
For more information about real estate taxes, see Publication 530.taxmap/pubs/p523-007.htm#en_us_publink100027651
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.