Page 346 - Individual Forms & Instructions Guide

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
a. Your state or locality imposes a • Charges for improvements that Line 5c 10:55 - 3-Jan-2023
general sales tax directly on the sale of a tend to increase the value of your prop-
home or on the cost of a substantial ad- erty (for example, an assessment to State and Local Personal
dition or major renovation. build a new sidewalk). The cost of a
b. You purchased the materials to property improvement is added to the Property Taxes
build a home or substantial addition or basis of the property. However, a charge Enter on line 5c the state and local per-
to perform a major renovation and paid is deductible if it is used only to main- sonal property taxes you paid, but only
the sales tax directly. tain an existing public facility in service if the taxes were based on value alone
(for example, a charge to repair an exist- and were imposed on a yearly basis.
c. Under your state law, your con- ing sidewalk, and any interest included
tractor is considered your agent in the in that charge). Example. You paid a yearly fee for
construction of the home or substantial the registration of your car. Part of the
addition or the performance of a major If your mortgage payments include fee was based on the car's value and part
renovation. The contract must state that your real estate taxes, you can include was based on its weight. You can deduct
the contractor is authorized to act in only the amount the mortgage company only the part of the fee that was based
your name and must follow your direc- actually paid to the taxing authority in on the car's value.
tions on construction decisions. In this 2022. Prepayment of next year's property
case, you will be considered to have pur- taxes. Only taxes paid in 2022 and as-
If you sold your home in 2022, any
chased any items subject to a sales tax real estate tax charged to the buyer sessed prior to 2023 can be deducted for
and to have paid the sales tax directly. 2022. State or local law determines
should be shown on your settlement
Don't include sales taxes paid on statement and in box 6 of any Form whether and when a property tax is as-
items used in your trade or business. If 1099-S you received. This amount is sessed, which is generally when the tax-
you received a refund of state or local considered a refund of real estate taxes. payer becomes liable for the property
general sales taxes in 2022, see Refund See Refunds and rebates, later. Any real tax imposed.
of general sales taxes, earlier. estate taxes you paid at closing should
be shown on your settlement statement. Line 6
Line 5b You must look at your real es- Other Taxes

State and Local Real Estate ! tate tax bill to decide if any Enter only one total on line 6, but list the
nondeductible itemized charg-
CAUTION
Taxes es, such as those listed earlier, are in- type and amount of each tax included.
cluded in the bill. If your taxing authori- Include on this line income taxes you
If you are a homeowner who ty (or lender) doesn't furnish you a copy paid to a foreign country and generation
TIP received assistance under a of your real estate tax bill, ask for it. skipping tax (GST) imposed on certain
State Housing Finance Agency income distributions.
Hardest Hit Fund program or an Emer- Prepayment of next year's property
gency Homeowners' Loan program, see taxes. Only taxes paid in 2022 and as- You may want to take a credit
Pub. 530 for the amount you can include sessed prior to 2023 can be deducted for TIP for the foreign tax instead of a
deduction. See the instructions
on line 5b. 2022. State or local law determines for Schedule 3 (Form 1040), line 1, for
whether and when a property tax is as-
Enter on line 5b the state and local details.
taxes you paid on real estate you own sessed, which is generally when the tax-
that wasn't used for business, but only if payer becomes liable for the property Don't include taxes you paid to a U.S.
the taxes are assessed uniformly at a like tax imposed. possession on this line; instead, include
rate on all real property throughout the Refunds and rebates. If you received a U.S. possession taxes on the appropriate
community, and the proceeds are used refund or rebate in 2022 of real estate state and local tax line.
for general community or governmental taxes you paid in 2022, reduce your de- Don't include federal estate tax on in-
purposes. Pub. 530 explains the deduc- duction by the amount of the refund or come in respect of a decedent on this
tions homeowners can take. rebate. If you received a refund or rebate
in 2022 of real estate taxes you paid in line; instead, include it on line 16.
Don't include the following amounts an earlier year, don't reduce your deduc-
on line 5b. tion by this amount. Instead, you must
• Foreign taxes you paid on real es- include the refund or rebate in income Interest You Paid
tate. on Schedule 1 (Form 1040), line 8z, if
• Itemized charges for services to you deducted the real estate taxes in the The rules for deducting interest vary, de-
specific property or persons (for exam- earlier year and the deduction reduced pending on whether the loan proceeds
ple, a $20 monthly charge per house for your tax. See Recoveries in Pub. 525 for are used for business, personal, or in-
trash collection, a $5 charge for every details on how to figure the amount to vestment activities. See Pub. 535 for
1,000 gallons of water consumed, or a include in income. more information about deducting busi-
flat charge for mowing a lawn that had ness interest expenses. See Pub. 550 for
grown higher than permitted under a lo- more information about deducting in-
cal ordinance). vestment interest expenses. You can't

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