Publication 523 - Selling Your Home - 2003 Page 26
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31If the buyer paid your share of the taxes (or any delin-
Special Situations
quent 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.
The situations that follow may affect your exclusion.
Example. The tax on Dennis and Beth White’s home
Expatriates. You cannot claim the exclusion if the expatri-
was $620 for the year. Their real property tax year was the
ation tax applies to you. The expatriation tax applies to
calendar year, with payment due August 1. They sold the
U.S. citizens who have renounced their citizenship (and
home on May 7. Dennis and Beth are considered to have
long-term residents who have ended their residency) if one
paid a proportionate share of the real estate taxes on the
of their principal purposes was to avoid U.S. taxes. See
home even though they did not actually pay them to the
chapter 4 of Publication 519, U.S. Tax Guide for Aliens, for
taxing authority.
more information about expatriation tax.
Dennis and Beth owned their home during the real
Home destroyed or condemned. If your home was de-
property tax year for 126 days (January 1 to May 6, the day
stroyed or condemned, any gain (for example, because of
before the sale). They figure their deduction for taxes as
insurance proceeds you received) qualifies for the exclu-
follows.
sion.
1. Enter the total real estate taxes for the real
Any part of the gain that cannot be excluded (because it
property tax year . . . . . . . . . . . . . . . . . . . . . .
$620
is more than the limit) may be postponed under the rules
2. Enter the number of days in the real property
explained in:
tax year that you owned the property . . . . . . .
126
•
Publication 547, in the case of a home that was
3. Divide line 2 by 365 . . . . . . . . . . . . . . . . . . . .
.345
destroyed, or
4. Multiply line 1 by line 3. This is your
deduction. Enter it on line 6 of Schedule A
•
Chapter 1 of Publication 544, in the case of a home
(Form 1040) . . . . . . . . . . . . . . . . . . . . . . . . .
$214
that was condemned.
Since the buyers paid all of the taxes, Dennis and Beth
also include the $214 in the home’s selling price. The
Sale of remainder interest. Subject to the other rules in
buyers add the $214 to their basis in the home. The buyers
this publication, you can choose to exclude gain from the
can deduct $406 ($620 – $214), the taxes for the part of
sale of a remainder interest in your home. If you make this
the year they owned the home.
choice, you cannot choose to exclude gain from your sale
of any other interest in the home that you sell separately.
Form 1099 –S. If the person responsible for closing the
sale (generally the settlement agent) must file Form
Exception for sales to related persons. You cannot
1099 –S, the information reported on the form to you and
exclude gain from the sale of a remainder interest in your
the IRS must include (in box 5) the part of any real estate
home to a related person. Related persons include your
tax that the buyer can deduct. If you actually paid the taxes
brothers and sisters, half-brothers and half-sisters,
for the year of sale, you must subtract the amount shown in
spouse, ancestors (parents, grandparents, etc.), and lineal
box 5 of Form 1099 –S from the amount you paid. The
descendants (children, grandchildren, etc.). Related per-
result is the amount you can deduct.
sons also include certain corporations, partnerships,
trusts, and exempt organizations.
More information. For more information about real es-
tate taxes, see Publication 530.
Deducting Taxes in the
Transfer taxes. You cannot deduct transfer taxes, stamp
taxes, and other incidental taxes and charges on the sale
Year of 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
When you sell your main home, treat real estate and
the sale. If you pay these amounts as the buyer, include
transfer taxes on that home as discussed in this section.
them in your cost basis of the property.
Real estate taxes. You and the buyer must deduct the
real estate taxes on your home for the year of sale accord-
Recapturing (Paying Back) a
ing to the number of days in the real property tax year that
each owned the home.
Federal Mortgage Subsidy
•
You are treated as paying the taxes up to, but not
including, the date of sale. You can deduct these
If you financed your home under a federally subsidized
taxes as an itemized deduction on Schedule A
program (loans from tax-exempt qualified mortgage bonds
(Form 1040) in the year of sale. It does not matter
or loans with mortgage credit certificates), you may have to
what part of the taxes you actually paid.
recapture all or part of the benefit you received from that
•
The buyer is treated as paying the taxes beginning
program when you sell or otherwise dispose of your home.
with the date of sale.
You recapture the benefit by increasing your federal in-
Page 26
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