Page 101 - 2020 Publication 17

Page 99 of 138
Fileid: … ations/P17/2020/A/XML/Cycle03/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Table 11-1. Which Taxes Can You Deduct? 14:38 - 19-Jan-2021

Type of Tax You Can Deduct You Can’t Deduct
Fees and Charges Fees and charges that are expenses of your trade or Fees and charges that aren’t expenses of your trade or
business or of producing income. business or of producing income, such as fees for
driver's licenses, car inspections, parking, or
charges for water bills (see Taxes and Fees You
Can’t Deduct).
Fines and penalties.
Income Taxes State and local income taxes. Federal income taxes.
Foreign income taxes. Employee contributions to private or voluntary
disability plans.
Employee contributions to state funds listed under State and local general sales taxes if you choose to
Contributions to state benefit funds. deduct state and local income taxes.
General Sales Taxes State and local general sales taxes, including State and local income taxes if you choose to deduct
compensating use taxes. state and local general sales taxes.
Other Taxes Taxes that are expenses of your trade or business. Federal excise taxes, such as tax on gasoline, that
aren’t expenses of your trade or business or of
producing income.
Taxes on property producing rent or royalty income. Per capita taxes.
One-half of self-employment tax paid.
Personal Property State and local personal property taxes. Customs duties that aren’t expenses of your trade or
Taxes business or of producing income.
Real Estate Taxes State and local real estate taxes. Real estate taxes that are treated as imposed on
someone else (see Division of real estate taxes
between buyers and sellers).
Tenant's share of real estate taxes paid by Foreign real estate taxes.
cooperative housing corporation.
Taxes for local benefits (with exceptions). See Real
Estate-Related Items You Can’t Deduct.
Trash and garbage pickup fees (with exceptions). See
Real Estate-Related Items You Can’t Deduct.
Rent increase due to higher real estate taxes.
Homeowners' association charges.
year. For more information, see Recoveries in Local benefit taxes are deductible only if • A periodic charge for a residential service
Pub. 525. they are for maintenance, repair, or interest (such as a $20 per month or $240 annual
charges related to those benefits. If only a part fee charged to each homeowner for trash
Real Estate-Related Items of the taxes is for maintenance, repair, or inter- collection), or
est, you must be able to show the amount of
You Can’t Deduct that part to claim the deduction. If you can’t de- • A flat fee charged for a single service pro-
vided by your government (such as a $30
termine what part of the tax is for maintenance,
Payments for the following items generally repair, or interest, none of it is deductible. charge for mowing your lawn because it
aren’t deductible as real estate taxes. Taxes for local benefits may be inclu- was allowed to grow higher than permitted
under your local ordinance).
• Taxes for local benefits. ! ded in your real estate tax bill. If your You must look at your real estate tax
• Itemized charges for services (such as CAUTION taxing authority (or mortgage lender) ! bill to determine if any nondeductible
trash and garbage pickup fees). doesn’t furnish you a copy of your real estate CAUTION itemized charges, such as those listed
• Transfer taxes (or stamp taxes). tax bill, ask for it. You should use the rules above, are included in the bill. If your taxing au-
above to determine if the local benefit tax is de-
• Rent increases due to higher real estate ductible. Contact the taxing authority if you thority (or mortgage lender) doesn’t furnish you
a copy of your real estate tax bill, ask for it.
taxes. need additional information about a specific
• Homeowners' association charges. charge on your real estate tax bill. Exception. Service charges used to main-
Taxes for local benefits. Deductible real es- Itemized charges for services. An itemized tain or improve services (such as trash collec-
tion or police and fire protection) are deductible
tate taxes generally don’t include taxes charged charge for services assessed against specific as real estate taxes if:
for local benefits and improvements tending to property or certain people isn’t a tax, even if the
increase the value of your property. These in- charge is paid to the taxing authority. For exam- • The fees or charges are imposed at a like
clude assessments for streets, sidewalks, water ple, you can’t deduct the charge as a real estate rate against all property in the taxing juris-
mains, sewer lines, public parking facilities, and tax if it is: diction;
similar improvements. You should increase the • A unit fee for the delivery of a service (such • The funds collected aren’t earmarked; in-
basis of your property by the amount of the as- as a $5 fee charged for every 1,000 gal- stead, they are commingled with general
sessment. lons of water you use), revenue funds; and

Chapter 11 Taxes Page 97