Publication 530 - Tax Information For Homeowners

15. The real estate taxes on the home you

Table 3. Adjusted Basis

bought were $1,275 for the year and had been

paid by the seller on August 15. You did not

This table lists examples of some items that generally will increase or decrease your basis in

reimburse the seller for your share of the real

your home. It is not intended to be all-inclusive.

estate taxes from September 1 through Decem-

ber 31. You must reduce the basis of your home

Increases to Basis

Decreases to Basis

by the $426 [(122 ÷ 365) × $1,275] the seller

paid for you. You can deduct your $426 share of

Improvements:

•

real estate taxes on your return for the year you

Insurance or other reimbursement for

•

purchased your home.

Putting an addition on your home

casualty losses

•

Replacing an entire roof

Deductible casualty loss not covered

Example 2. You bought your home on May

•

Paving your driveway

by insurance

3, 2011. The property tax year in your area is the

•

Installing central air conditioning

Payments received for easement or

calendar year. The taxes for the previous year

•

right-of-way granted

Rewiring your home

are assessed on January 2 and are due on May

•

Depreciation allowed or allowable if

31 and November 30. Under state law, the taxes

home is used for business or rental

become a lien on May 31. You agreed to pay all

Assessments for local improvements

purposes

taxes due after the date of sale. The taxes due in

•

(see Assessments for local benefits, under

Value of subsidy for energy

2011 for 2010 were $1,375. The taxes due in

What You Can and Cannot Deduct)

conservation measure excluded from

2012 for 2011 will be $1,425.

income

You cannot deduct any of the taxes paid in

Amounts spent to restore damaged property

2011 because they relate to the 2010 property

tax year and you did not own the home until

2011. Instead, you add the $1,375 to the cost

If you elect to deduct the sales taxes on

(basis) of your home.

Basis

the purchase or construction of your

You owned the home in 2011 for 243 days

home as an itemized deduction on

(May 3 to December 31), so you can take a tax

CAUTION

Schedule A (Form 1040), you cannot include the

deduction on your 2012 return of $949 [(243 ÷

Basis is your starting point for figuring a gain or

sales taxes as part of your cost basis in the

365) × $1,425] paid in 2012 for 2011. You add

loss if you later sell your home, or for figuring

home.

the remaining $476 ($1,425 − $949) of taxes

depreciation if you later use part of your home

paid in 2012 to the cost (basis) of your home.

for business purposes or for rent.

Purchase. The basis of a home you bought is

While you own your home, you may add

the amount you paid for it. This usually includes

Settlement or closing costs. If you bought

certain items to your basis. You may subtract

your down payment and any debt you assumed.

your home, you probably paid settlement or

certain other items from your basis. These items

The basis of a cooperative apartment is the

closing costs in addition to the contract price.

are called adjustments to basis and are ex-

amount you paid for your shares in the corpora-

These costs are divided between you and the

plained later under Adjusted Basis.

tion that owns or controls the property. This

seller according to the sales contract, local cus-

It is important that you understand these

amount includes any purchase commissions or

tom, or understanding of the parties. If you built

terms when you first acquire your home be-

other costs of acquiring the shares.

your home, you probably paid these costs when

cause you must keep track of your basis and

Construction. If you contracted to have your

you bought the land or settled on your mortgage.

adjusted basis during the period you own your

home built on land that you own, your basis in

The only settlement or closing costs you can

home. You also must keep records of the events

the home is your basis in the land plus the

that affect basis or adjusted basis. See Keeping

deduct are home mortgage interest and certain

amount you paid to have the home built. This

real estate taxes. You deduct them in the year

Records, later.

includes the cost of labor and materials, the

you buy your home if you itemize your deduc-

amount you paid the contractor, any architect’s

Figuring Your Basis

tions. You can add certain other settlement or

fees, building permit charges, utility meter and

closing costs to the basis of your home.

connection charges, and legal fees that are di-

How you figure your basis depends on how you

Items added to basis. You can include in

rectly connected with building your home. If you

acquire your home. If you buy or build your

your basis the settlement fees and closing costs

built all or part of your home yourself, your basis

home, your cost is your basis. If you receive your

you paid for buying your home. A fee is for

is the total amount it cost you to build it. You

home as a gift, your basis is usually the same as

buying the home if you would have had to pay it

cannot include in basis the value of your own

the adjusted basis of the person who gave you

even if you paid cash for the home.

labor or any other labor for which you did not

the property. If you inherit your home from a

The following are some of the settlement

pay.

decedent, different rules apply depending on the

fees and closing costs that you can include in

date of the decedent’s death. Each of these

Real estate taxes. Real estate taxes are usu-

the original basis of your home.

topics is discussed later.

ally divided so that you and the seller each pay

•

Abstract fees (abstract of title fees).

taxes for the part of the property tax year that

Property transferred from a spouse. If your

•

each owned the home. See the earlier discus-

Charges for installing utility services.

home is transferred to you from your spouse, or

sion of Real estate taxes paid at settlement or

from your former spouse as a result of a divorce,

•

Legal fees (including fees for the title

closing, under Real Estate Taxes, earlier, to

your basis is the same as your spouse’s (or

search and preparation of the sales con-

figure the real estate taxes you paid or are con-

former spouse’s) adjusted basis just before the

tract and deed).

sidered to have paid.

transfer. Publication 504, Divorced or Separated

•

Recording fees.

If you pay any part of the seller’s share of the

Individuals, fully discusses transfers between

real estate taxes (the taxes up to the date of

spouses.

•

Surveys.

sale), and the seller did not reimburse you, add

•

Transfer or stamp taxes.

those taxes to your basis in the home. You

Cost as Basis

cannot deduct them as taxes paid.

•

Owner’s title insurance.

If the seller paid any of your share of the real

•

The cost of your home, whether you purchased

Any amount the seller owes that you

estate taxes (the taxes beginning with the date

it or constructed it, is the amount you paid for it,

of sale), you can still deduct those taxes. Do not

agree to pay, such as back taxes or inter-

including any debt you assumed.

est, recording or mortgage fees, cost for

include those taxes in your basis. If you did not

The cost of your home includes most settle-

improvements or repairs, and sales com-

reimburse the seller, you must reduce your ba-

ment or closing costs you paid when you bought

missions.

sis by the amount of those taxes.

the home. If you built your home, your cost

includes most closing costs paid when you

Example 1. You bought your home on Sep-

If the seller actually paid for any item for which

bought the land or settled on your mortgage.

tember 1. The property tax year in your area is

you are liable and for which you can take a

See Settlement or closing costs later.

the calendar year, and the tax is due on August

deduction (such as your share of the real estate

Page 10

Publication 530 (2011)

Publication 530 - Tax Information For Homeowners - 2011 Page 10

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