![]() ![]() Starting for the tax year 2018, the Tax Cuts and Jobs Act, passed by the Republicans at the end of 2017, the deductibility of income or sales taxes and property taxes is capped at $10,000 per return, and this is not indexed for inflation. Either State and Local Income Taxes or General Sales Taxes Are Deductible This deduction is only reduced, not completely phased out, so even the richest taxpayers will be able to deduct at least 20% of their itemized deductions. Additionally, as itemized deductions, which are claimed on Schedule A of Form 1040, the deduction of taxes is subject to the same adjusted gross income (AGI) reduction rules that apply to itemized deductions in general, where up to 80% of the itemized deductions may be nondeductible. Note, however, that state and local taxes cannot be deducted under the alternative minimum tax. Transfer or excise taxes imposed on the sale of property are deductible by increasing the adjusted basis of the property for the buyer and as a sales expense for the seller. However, most taxpayers will save more money on foreign income taxes by claiming the foreign tax credit, which is claimed on Form 1116, Foreign Tax Credit. State, local, and foreign real property taxes are also deductible. Individual taxpayers can also reduce their income tax liability by claiming itemized deductions for property taxes, and either state, local, and foreign income taxes, or sales taxes. So if a business pays $5 for paperclips, and pays $.30 for sales tax, then it can deduct $5.30 for the cost of the paperclips. Sales taxes on items that businesses buy are deductible only as an adjustment to the basis of the property. ![]() Businesses can deduct taxes directly from their income by claiming them on Schedule C. Many taxes can be deducted from federal income tax. While it might seem unfair that you can't deduct your condo fees if you can't claim any of the tax deductions defined here, remember that you wouldn't be able to deduct most of the costs that condo fees cover with a traditional, detached home either.Deductibility Of Taxes: State, Local, and Foreign Income Taxes, General Sales Taxes, and Real Estate Taxes › Money › Taxes › Personal Tax Deductions and Tax Credits Deductibility of Taxes: State, Local, and Foreign Income Taxes, General Sales Taxes, and Real Estate Taxes Finally, if your condo association passes through tax-deductible costs to you as a part of your association dues and separates them on your statements, you may be able to write off those costs. You can still write off your home mortgage interest, subject to the same rules as a single family residence. When you own a condo, you get the same write-offs that you would get with a house. To claim this adjustment to your cost and your profit, get the information on what your condo spent on major improvements from its board or its board's accountant. Since capital gains are based on the difference between your total cost and your selling price after fees and commissions, those improvements help reduce your taxable profit. ![]() When you improve a property that you own, you're allowed to add the cost of those improvements to what you paid for the property. If your condo complex makes capital improvements to the property, you may be able to recover some of those costs, as well, in the form of reduced capital gains tax on profits when you sell. Your condo fees can be included in these expenses, as they are "ordinary and necessary." Furthermore, if you end up losing money on your condo after subtracting your rental fees and other expenses, you might be able to subtract that loss from your regular income, further sheltering you from taxes. When you use your condo as a rental property, you can deduct all of your rental operating expenses off the top of your rental income. To claim this deduction, you will need to meet the Internal Revenue Service's relatively narrow definition of a home office. If you prefer, you can also allocate your home office's share on a per square foot basis. Because these include the condo fees that would be assigned to that portion of your unit, if you have a condo with six rooms and one of them is a home office, 16.67 percent of your association dues are tax deductible. When you claim a home office deduction, you're entitled to write off a proportional share of all of the expenses you incur in maintaining your home office. Association dues are tax deductible if you have a home office or rent the property. ![]()
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