The following items are not deductible as real estate taxes.
Charges for services. An itemized charge for services to specific property
or people is not a tax, even if the charge is paid to the taxing authority. You
cannot deduct the charge as a real estate tax if it is:
- A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000
gallons of water you use),
- A periodic charge for a residential service (such as a $20 per month or $240
annual fee charged for trash collection), or
- A flat fee charged for a single service provided by your local government
(such as a $30 charge for mowing your lawn because it had grown higher than
permitted under a local ordinance).
You must look at your real estate tax bill to decide if any nondeductible
itemized charges, such as those just listed, are included in the bill. If your
taxing authority (or lender) does not furnish you a copy of your real estate
tax bill, ask for it.
Assessments for local benefits. You cannot deduct amounts you pay for
local benefits that tend to increase the value of your property. Local benefits
include the construction of streets, sidewalks, or water and sewer systems. You
must add these amounts to the basis of your property.
You can, however, deduct assessments (or taxes) for local benefits if they are
for maintenance, repair, or interest charges related to those benefits. An example
is a charge to repair an existing sidewalk and any interest included in that charge.
If only a part of the assessment is for maintenance, repair, or interest charges,
you must be able to show the amount of that part to claim the deduction. If you cannot
show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it.
An assessment for a local benefit may be listed as an item in your real estate tax
bill. If so, use the rules in this section to find how much of it, if any, you can deduct.
Transfer taxes (or stamp taxes). You cannot deduct transfer taxes and similar
taxes and charges on the sale of a personal home. If you are the buyer and you pay
them, include them in the cost basis of the property. If you are the seller and you
pay them, they are expenses of the sale and reduce the amount realized on the sale.
Homeowners association assessments. You cannot deduct these assessments
because the homeowners association imposes them rather than a state or local government.