Page 99 - 2020 Publication 17

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
income taxes. If so, you and your spouse can instructions for Schedule A (Form 1040),
deduct on your separate federal returns the State and Local line 5a, for details.
amount you each actually paid. General Sales Taxes
Joint federal return. If you file a joint federal State and Local Real
return, you can deduct the state and local in- You can elect to deduct state and local general Estate Taxes
come taxes both of you paid. sales taxes, instead of state and local income
Contributions to state benefit funds. As an taxes, as an itemized deduction on Schedule A Deductible real estate taxes are any state and
employee, you can deduct mandatory contribu- (Form 1040), line 5a. You can use either your local taxes on real property levied for the gen-
tions to state benefit funds withheld from your actual expenses or the state and local sales tax eral public welfare. You can deduct these taxes
wages that provide protection against loss of tables to figure your sales tax deduction. only if they are assessed uniformly against all
wages. For example, certain states require em- Actual expenses. Generally, you can deduct property under the jurisdiction of the taxing au-
ployees to make contributions to state funds the actual state and local general sales taxes thority. The proceeds must be for general com-
providing disability or unemployment insurance (including compensating use taxes) if the tax munity or governmental purposes and not be a
benefits. Mandatory payments made to the fol- rate was the same as the general sales tax rate. payment for a special privilege granted or serv-
lowing state benefit funds are deductible as ice rendered to you.
state income taxes on Schedule A (Form 1040), Food, clothing, and medical supplies.
Deductible real estate taxes generally don’t
line 5a. Sales taxes on food, clothing, and medical sup- include taxes charged for local benefits and im-
• Alaska Unemployment Compensation plies are deductible as a general sales tax even provements that increase the value of the prop-
if the tax rate was less than the general sales
Fund. tax rate. erty. They also don’t include itemized charges
• California Nonoccupational Disability Ben- for services (such as trash collection) assessed
efit Fund. Motor vehicles. Sales taxes on motor vehi- against specific property or certain people,
• New Jersey Nonoccupational Disability cles are deductible as a general sales tax even even if the charge is paid to the taxing authority.
if the tax rate was less than the general sales
For more information about taxes and charges
Benefit Fund. tax rate. However, if you paid sales tax on a that aren’t deductible, see Real Estate-Related
• New Jersey Unemployment Compensation motor vehicle at a rate higher than the general Items You Can’t Deduct, later.
Fund. sales tax, you can deduct only the amount of Tenant-shareholders in a cooperative hous-
• New York Nonoccupational Disability Ben- the tax that you would have paid at the general ing corporation. Generally, if you are a ten-
efit Fund. sales tax rate on that vehicle. Include any state ant-stockholder in a cooperative housing corpo-
and local general sales taxes paid for a leased
• Pennsylvania Unemployment Compensa- motor vehicle. For purposes of this section, mo- ration, you can deduct the amount paid to the
tion Fund. tor vehicles include cars, motorcycles, motor corporation that represents your share of the
real estate taxes the corporation paid or incur-
• Rhode Island Temporary Disability Benefit homes, recreational vehicles, sport utility vehi- red for your dwelling unit. The corporation
Fund. cles, trucks, vans, and off-road vehicles. should provide you with a statement showing
• Washington State Supplemental Work- If you use the actual expenses method, your share of the taxes. For more information,
men's Compensation Fund. ! you must have receipts to show the see Special Rules for Cooperatives in Pub. 530.
Employee contributions to private or CAUTION general sales taxes paid. Division of real estate taxes between buy-
! voluntary disability plans aren’t deduc- Trade or business items. Don't include ers and sellers. If you bought or sold real es-
CAUTION tible. sales taxes paid on items used in your trade or tate during the year, the real estate taxes must
be divided between the buyer and the seller.
Refund (or credit) of state or local income business on Schedule A (Form 1040). Instead, The buyer and the seller must divide the real
taxes. If you receive a refund of (or credit for) go to the instructions for the form you are using estate taxes according to the number of days in
to report business income and expenses to see
state or local income taxes in a year after the the real property tax year (the period to which
year in which you paid them, you may have to if you can deduct these taxes. the tax is imposed relates) that each owned the
include the refund in income on Schedule 1 Optional sales tax tables. Instead of using property. The seller is treated as paying the
(Form 1040), line 1, in the year you receive it. your actual expenses, you can figure your state taxes up to, but not including, the date of sale.
This includes refunds resulting from taxes that and local general sales tax deduction using the The buyer is treated as paying the taxes begin-
were overwithheld, applied from a prior-year re- state and local sales tax tables in the Instruc- ning with the date of sale. This applies regard-
turn, not figured correctly, or figured again be- tions for Schedule A (Form 1040). You may less of the lien dates under local law. Generally,
cause of an amended return. If you didn’t item- also be able to add the state and local general this information is included on the settlement
ize your deductions in the previous year, don’t sales taxes paid on certain specified items. statement provided at the closing.
include the refund in income. If you deducted Your applicable table amount is based on If you (the seller) can’t deduct taxes until
the taxes in the previous year, include all or part the state where you live, your income, and your they are paid because you use the cash method
of the refund on Schedule 1 (Form 1040), line 1, family size. Your income is your adjusted gross of accounting, and the buyer of your property is
in the year you receive the refund. For a discus- income plus any nontaxable items such as the personally liable for the tax, you are considered
sion of how much to include, see Recoveries in following. to have paid your part of the tax at the time of
Pub. 525, Taxable and Nontaxable Income, for the sale. This lets you deduct the part of the tax
more information. • Tax-exempt interest. to the date of sale even though you didn’t ac-
• Veterans’ benefits. tually pay it. However, you must also include
Foreign Income Taxes • Nontaxable combat pay. the amount of that tax in the selling price of the
property. The buyer must include the same
• Workers’ compensation. amount in his or her cost of the property.
Generally, you can take either a deduction or a
credit for income taxes imposed on you by a • Nontaxable part of social security and rail- You figure your deduction for taxes on each
foreign country or a U.S. possession. However, road retirement benefits. property bought or sold during the real property
you can’t take a deduction or credit for foreign • Nontaxable part of IRA, pension, or annuity tax year as follows.
income taxes paid on income that is exempt distributions, excluding rollovers.
from U.S. tax under the foreign earned income
exclusion or the foreign housing exclusion. For • Public assistance payments.
information on these exclusions, see Pub. 54, If you lived in different states during the
Tax Guide for U.S. Citizens and Resident Aliens same tax year, you must prorate your applica-
Abroad. For information on the foreign tax ble table amount for each state based on the
credit, see Pub. 514. days you lived in each state. See the
Chapter 11 Taxes Page 95