|
Prorated Real Estate Tax Example
|
The
following are examples of prorated real estate taxes:
Example 1:
On
August 1st, Mr. Jason Allen purchased a home. The
property tax year in his area is the calendar year 2007 (This
normally isn't the case but let's keep things simple). The tax for the
year was $1,600 and was due and paid by the seller on July 15.
Jason owned the home during the property tax year for 153 days
(August 1 to December 31, including the date of purchase). He
would figure his deduction for real estate taxes as follows:
1) Real Estate Taxes for the property year
$1,600.00
2) # of days Jason owned the property
153
3) Divide line 2 by 365 (# of days in year)
.4192
4) Multiply line 1 by line 3.
$ 670.72
Thus, Jason can deduct $670.72 for the year if he itemizes his
deductions. By the IRS guidelines, Jason is considered to have
paid this amount and can deduct it even if, under the contract of
sale, he did not have to reimburse the seller.
Note that if Jason does not reimburse the seller, he must adjust
the cost basis of his home by the amount of the deduction that the
seller paid for him.
Example 2:
Jen De Leon purchased a home on September 1. The property tax
year (the period to which the tax relates) in her area is the calendar
year. The tax for the year was $730 and was due and paid by the
seller on August 15. Jen owned the home during the property tax year
for 122 days (September 1 to December 31). Jen would
figure her
real estate taxes as follows:
- Real Estate Taxes for
the year
- # of days Jen owned the
property
- Divide line 2 by 365 (#
of days in year)
- Multiply line 1 by line
3
|
$730.00
122 days
.3342
$243.97
|
Jen may deduct $243.97 on her tax
return for the year if she itemized her
tax deductions. Jen is considered to have paid this amount and can
deduct it on her tax return even if, under the sales contract, she did not
have to reimburse the seller.
Click here to leave prorated real
estate examples and
return to prorated real estate tax main
|
|
