Publication 530 - Tax Information For Homeowners

considered to have paid this amount and can

If only a part of the assessment is for mainte-

units. The units that the tenant-stockholder has

deduct it on your return even if, under the con-

nance, repair, or interest charges, you must be

the right to occupy can be rented to others.

tract, you did not have to reimburse the seller.

able to show the amount of that part to claim the

Deductible taxes. You figure your share of

deduction. If you cannot show what part of the

Delinquent taxes. Delinquent taxes are un-

real estate taxes in the following way.

assessment is for maintenance, repair, or inter-

paid taxes that were imposed on the seller for an

est charges, you cannot deduct any of it.

earlier tax year. If you agree to pay delinquent

1. Divide the number of your shares of stock

An assessment for a local benefit may be

taxes when you buy your home, you cannot

by the total number of shares outstanding,

listed as an item in your real estate tax bill. If so,

deduct them. You treat them as part of the cost

including any shares held by the corpora-

use the rules in this section to find how much of

of your home. See Real estate taxes, later,

tion.

it, if any, you can deduct.

under Basis.

2. Multiply the corporation’s deductible real

Transfer taxes (or stamp taxes). You cannot

estate taxes by the number you figured in

Escrow accounts. Many monthly house pay-

deduct transfer taxes and similar taxes and

(1). This is your share of the real estate

ments include an amount placed in escrow (put

charges on the sale of a personal home. If you

taxes.

in the care of a third party) for real estate taxes.

are the buyer and you pay them, include them in

You may not be able to deduct the total you pay

Generally, the corporation will tell you your

the cost basis of the property. If you are the

into the escrow account. You can deduct only

share of its real estate tax. This is the amount

seller and you pay them, they are expenses of

the real estate taxes that the lender actually paid

you can deduct if it reasonably reflects the cost

the sale and reduce the amount realized on the

from escrow to the taxing authority. Your real

of real estate taxes for your dwelling unit.

sale.

estate tax bill will show this amount.

Refund of real estate taxes. If the corpora-

Homeowners association assessments.

Refund or rebate of real estate taxes. If you

tion receives a refund of real estate taxes it paid

You cannot deduct these assessments because

receive a refund or rebate of real estate taxes

in an earlier year, it must reduce the amount of

the homeowners association, rather than a state

this year for amounts you paid this year, you

real estate taxes paid this year when it allocates

or local government, imposes them.

must reduce your real estate tax deduction by

the tax expense to you. Your deduction for real

the amount refunded to you. If the refund or

estate taxes the corporation paid this year is

rebate was for real estate taxes paid for a prior

reduced by your share of the refund the corpora-

Special Rules for Cooperatives

year, you may have to include some or all of the

tion received.

refund in your income. For more information,

If you own a cooperative apartment, some spe-

Sales Taxes

see Recoveries in Publication 525, Taxable and

cial rules apply to you, though you generally

Nontaxable Income.

receive the same tax treatment as other home-

Generally, you can elect to deduct state and

owners. As an owner of a cooperative apart-

local general sales taxes instead of state and

Items You Cannot Deduct

ment, you own shares of stock in a corporation

local income taxes as an itemized deduction on

that owns or leases housing facilities. You can

as Real Estate Taxes

Schedule A (Form 1040). Deductible sales taxes

deduct your share of the corporation’s deducti-

may include sales taxes paid on your home

ble real estate taxes if the cooperative housing

The following items are not deductible as real

(including mobile and prefabricated), or home

corporation meets the following conditions:

estate taxes.

building materials if the tax rate was the same as

the general sales tax rate. For information on

1. The corporation has only one class of

Charges for services. An itemized charge for

figuring your deduction, see the Instructions for

stock outstanding,

services to specific property or people is not a

Schedule A (Form 1040).

tax, even if the charge is paid to the taxing

2. Each stockholder, solely because of own-

authority. You cannot deduct the charge as a

If you elect to deduct the sales taxes

ership of the stock, can live in a house,

real estate tax if it is:

paid on your home, or home building

apartment, or house trailer owned or

materials, you cannot include them as

•

leased by the corporation,

CAUTION

A unit fee for the delivery of a service

part of your cost basis in the home.

(such as a $5 fee charged for every 1,000

3. No stockholder can receive any distribution

gallons of water you use),

out of capital, except on a partial or com-

Home Mortgage Interest

•

plete liquidation of the corporation, and

A periodic charge for a residential service

(such as a $20 per month or $240 annual

This section of the publication gives you basic

4. At least one of the following:

fee charged for trash collection), or

information about home mortgage interest, in-

a. At least 80% of the corporation’s gross

•

cluding information on interest paid at settle-

A flat fee charged for a single service pro-

income for the tax year was paid by the

ment, points, and Form 1098, Mortgage Interest

vided by your local government (such as a

tenant-stockholders. For this purpose,

Statement.

$30 charge for mowing your lawn because

gross income means all income re-

Most home buyers take out a mortgage

it had grown higher than permitted under a

ceived during the entire tax year, includ-

(loan) to buy their home. They then make

local ordinance).

ing any received before the corporation

monthly payments to either the mortgage holder

changed to cooperative ownership.

or someone collecting the payments for the

You must look at your real estate tax

mortgage holder.

b. At least 80% of the total square footage

bill to decide if any nondeductible item-

of the corporation’s property must be

Usually, you can deduct the entire part of

ized charges, such as those listed

CAUTION

available for use by the ten-

your payment that is for mortgage interest, if you

above, are included in the bill. If your taxing

ant-stockholder during the entire tax

itemize your deductions on Schedule A (Form

authority (or lender) does not furnish you a copy

year.

1040). However, your deduction may be limited

of your real estate tax bill, ask for it.

if:

c. At least 90% of the expenditures paid or

•

Assessments for local benefits. You cannot

incurred by the corporation were used

Your total mortgage balance is more than

deduct amounts you pay for local benefits that

for the acquisition, construction, man-

$1 million ($500,000 if married filing sepa-

tend to increase the value of your property. Lo-

agement, maintenance, or care of the

rately), or

cal benefits include the construction of streets,

property for the benefit of the ten-

•

You took out a mortgage for reasons other

sidewalks, or water and sewer systems. You

ant-shareholder during the entire tax

than to buy, build, or improve your home.

must add these amounts to the basis of your

year.

property.

If either of these situations applies to you, you

You can, however, deduct assessments (or

will need to get Publication 936. You also may

Tenant-stockholders. A tenant-stockholder

taxes) for local benefits if they are for mainte-

need Publication 936 if you later refinance your

nance, repair, or interest charges related to

can be any entity (such as a corporation, trust,

mortgage or buy a second home.

estate, partnership, or association) as well as an

those benefits. An example is a charge to repair

individual. The tenant-stockholder does not

Refund of home mortgage interest. If you

an existing sidewalk and any interest included in

that charge.

have to live in any of the cooperative’s dwelling

receive a refund of home mortgage interest that

Publication 530 (2008)

Page 3

Publication 530 - Tax Information For Homeowners - 2008 Page 3

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