Publication 530 - Tax Information For Homeowners

Enter the total real estate taxes for

year to your mortgage servicer, the State HFA,

Assessments for local benefits. You cannot

the real property tax year . . . . . . .

$730

deduct amounts you pay for local benefits that

or HUD on the home mortgage (including the

Enter the number of days in the

tend to increase the value of your property. Lo-

amount shown on box 3 of Form 1098-MA, Mort-

property tax year that you owned the

cal benefits include the construction of streets,

gage Assistance Payments), but not more than

property . . . . . . . . . . . . . . . . . .

122

sidewalks, or water and sewer systems. You

the sum of the amounts shown on Form 1098,

Divide line 2 by 365 . . . . . . . . . .

.3342

must add these amounts to the basis of your

Multiply line 1 by line 3. This is your

Mortgage Interest Statement, in box 1 (mort-

property.

deduction. Enter it on Schedule A

gage interest received), box 4 (mortgage insur-

You can, however, deduct assessments (or

(Form 1040), line 6 . . . . . . . . . . .

$244

ance premiums), and box 5 (real property

taxes) for local benefits if they are for mainte-

You can deduct $244 on your return for the

taxes). However, you are not required to use this

nance, repair, or interest charges related to

year if you itemize your deductions. You are

special method to compute your deduction for

those benefits. An example is a charge to repair

considered to have paid this amount and can

mortgage interest and real estate taxes on your

an existing sidewalk and any interest included in

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

that charge.

main home.

tract, you did not have to reimburse the seller.

If only a part of the assessment is for mainte-

Real Estate Taxes

nance, repair, or interest charges, you must be

Delinquent taxes. Delinquent taxes are un-

able to show the amount of that part to claim the

paid taxes that were imposed on the seller for an

deduction. If you cannot show what part of the

Most state and local governments charge an

earlier tax year. If you agree to pay delinquent

assessment is for maintenance, repair, or inter-

annual tax on the value of real property. This is

taxes when you buy your home, you cannot

est charges, you cannot deduct any of it.

deduct them. You treat them as part of the cost

called a real estate tax. You can deduct the tax if

An assessment for a local benefit may be

of your home. See Real estate taxes, later,

it is based on the assessed value of the real

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

under Basis.

property and the taxing authority charges a uni-

use the rules in this section to find how much of

form rate on all property in its jurisdiction. The

it, if any, you can deduct.

Escrow accounts. Many monthly house pay-

tax must be for the welfare of the general public

ments include an amount placed in escrow (put

Transfer taxes (or stamp taxes). You cannot

and not be a payment for a special privilege

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

deduct transfer taxes and similar taxes and

granted or service rendered to you.

You may not be able to deduct the total you pay

charges on the sale of a personal home. If you

into the escrow account. You can deduct only

are the buyer and you pay them, include them in

the real estate taxes that the lender actually paid

the cost basis of the property. If you are the

Deductible Real Estate Taxes

from escrow to the taxing authority. Your real

seller and you pay them, they are expenses of

estate tax bill will show this amount.

the sale and reduce the amount realized on the

You can deduct real estate taxes imposed on

sale.

you. You must have paid them either at settle-

Refund or rebate of real estate taxes. If you

ment or closing, or to a taxing authority (either

Homeowners association assessments.

receive a refund or rebate of real estate taxes

directly or through an escrow account) during

this year for amounts you paid this year, you

You cannot deduct these assessments because

the year. If you own a cooperative apartment,

must reduce your real estate tax deduction by

the homeowners association, rather than a state

the amount refunded to you. If the refund or

or local government, imposes them.

see Special Rules for Cooperatives, later.

rebate was for real estate taxes paid for a prior

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

Where to deduct real estate taxes. Enter the

Special Rules for Cooperatives

refund in your income. For more information,

amount of your deductible real estate taxes on

see Recoveries in Publication 525, Taxable and

If you own a cooperative apartment, some spe-

Schedule A (Form 1040), line 6.

Nontaxable Income.

cial rules apply to you, though you generally

receive the same tax treatment as other home-

Real estate taxes paid at settlement or clos-

Items You Cannot Deduct

owners. As an owner of a cooperative apart-

ing. Real estate taxes are generally divided so

ment, you own shares of stock in a corporation

as Real Estate Taxes

that you and the seller each pay taxes for the

that owns or leases housing facilities. You can

part of the property tax year you owned the

deduct your share of the corporation’s deducti-

The following items are not deductible as real

home. Your share of these taxes is fully deducti-

ble real estate taxes if the cooperative housing

estate taxes.

corporation meets the following conditions:

ble if you itemize your deductions.

Charges for services. An itemized charge for

Division of real estate taxes. For federal

1. The corporation has only one class of

services to specific property or people is not a

income tax purposes, the seller is treated as

stock outstanding,

tax, even if the charge is paid to the taxing

paying the property taxes up to, but not includ-

authority. You cannot deduct the charge as a

2. Each stockholder, solely because of own-

ing, the date of sale. You (the buyer) are treated

real estate tax if it is:

ership of the stock, can live in a house,

as paying the taxes beginning with the date of

•

apartment, or house trailer owned or

A unit fee for the delivery of a service

sale. This applies regardless of the lien dates

leased by the corporation,

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

under local law. Generally, this information is

gallons of water you use),

3. No stockholder can receive any distribution

included on the settlement statement you get at

•

out of capital, except on a partial or com-

A periodic charge for a residential service

closing.

plete liquidation of the corporation, and

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

You and the seller each are considered to

fee charged for trash collection), or

4. At least one of the following:

have paid your own share of the taxes, even if

•

A flat fee charged for a single service pro-

one or the other paid the entire amount. You

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

vided by your local government (such as a

each can deduct your own share, if you itemize

income for the tax year was paid by the

$30 charge for mowing your lawn because

deductions, for the year the property is sold.

tenant-stockholders. For this purpose,

it had grown higher than permitted under a

gross income means all income re-

local ordinance).

Example. You bought your home on Sep-

ceived during the entire tax year, includ-

ing any received before the corporation

tember 1. The property tax year (the period to

You must look at your real estate tax

changed to cooperative ownership.

which the tax relates) in your area is the calen-

bill to decide if any nondeductible item-

dar year. The tax for the year was $730 and was

b. At least 80% of the total square footage

ized charges, such as those listed

due and paid by the seller on August 15.

CAUTION

of the corporation’s property must be

above, are included in the bill. If your taxing

available for use by the ten-

You owned your new home during the prop-

authority (or lender) does not furnish you a copy

ant-stockholders during the entire tax

erty tax year for 122 days (September 1 to De-

of your real estate tax bill, ask for it. Contact the

year.

cember 31, including your date of purchase).

taxing authority if you need additional informa-

You figure your deduction for real estate taxes

tion about a specific charge on your real estate

c. At least 90% of the expenditures paid or

on your home as follows.

tax bill.

incurred by the corporation were used

Publication 530 (2011)

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Publication 530 - Tax Information For Homeowners - 2011 Page 3

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