are real estate transfer taxes deductible

Is Real Estate Transfer Taxes Deductible?

Can you deduct real estate property taxes from your income? The short answer is yes. Yes, it’s usually allowable for an individual to deduct real property transfer taxes on a property sale. An eligible real estate agent can use different types of deductions to lower his or her tax liability. Although these are general rules, some property transfer taxes are subject to certain qualifications.

In most cases, real property transfer taxes are not taxable unless you actually spend some time working on the property. However, some states have laws that apply only to real property transferred through mortgage financing. Therefore, if you take advantage of the right to deduct the tax on your tax return, you may not be able to claim this deduction if you purchase the property with a mortgage.

If you own a second home and decide to sell in the future, you may want to consider deducting property transfer taxes against the sale proceeds. This allows you to avoid paying taxes for years to come. Of course, you will need to pay the full amount of the taxes once you receive the payment, so it’s wise to keep this option open until you make the final payment. It’s best to keep your taxes deducted, rather than pay the amount in full right away.

Real estate transfers generally occur through the use of a mortgage. In order to make the property tax deductible, you must pay down the mortgage amount with payments and not by “stashing” the money in some other tax-free account. Even though a mortgage may be held by a trust account, you should still follow the standard steps for property ownership when transferring real property.

Real estate transfer taxes on the sale of residential and commercial property may be exempt from state income tax if the property is located in an area that is designated as having a low population density. This includes areas with a low or fixed ratio of residents per square mile. Other states may even allow you to write off the tax on your income tax return if you live in one of these communities. So long as you are active in the community in some way, you qualify.

Real estate transfer taxes are usually only available to those who have lived in the same home for two years. Prior to purchasing real property, be sure to obtain the necessary documentation that covers the rules in your state. For more information, consult with a local tax professional.