Today TaxMama hears from Craig in the TaxQuips Forum, who asks. “Are items on a HUD-1 (seller’s side), Lines 510-519, deductible by the seller as taxes paid on Schedule A or are they adjustments to the basis?”
Rita Lewis, EA in CT says that the seller can deduct those real estate taxes up to, but not including, the date of sale. If they were assessments, condo fees, etc., then they are not deductible. Investment property will have a different treatment for these lines.
TaxMama adds that the homeowner can deduct the amounts on HUD1 line 510 and 511 on Schedule A. Rental property owners can deduct them on Schedule E. Line 512 – Assessments are not deductible. Those are fees, not taxes. You could capitalize those.
The other items, they would probably not end up as deductions. Depending on what the costs are, they might be capitalized, or they might be ignored. Those lines might include penalties for late taxes and such – those are neither capitalized nor deducted.
As Rita explained, property owners can deduct taxes paid as long as they own the property. Sometimes a seller will pay a buyer’s share of the taxes. Those are not deductions – those would be basis adjustments or adjustments to the sales price.
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