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When Can You Deduct Taxes on Your Income Tax Return?

Posted by attorney Henry Lively

When can you deduct taxes on your income tax return? The first hurdle you will face is that you will need to itemize to be able to deduct taxes.

Tests To Deduct Any Tax

The following two tests must be met for you to deduct any tax.

The tax must be imposed on you.

You must pay the tax during your tax year.

** The tax must be imposed on you.** Generally, you can deduct only taxes imposed on you. Generally, you can deduct property taxes only if you are an owner of the property. If your spouse This means you must own the property and pay the real estate taxes. ** You must pay the tax during the tax year.** If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during the tax year you are deducting it. If you pay your taxes by check, the day you mail or deliver the check is the date of payment, provided the check is honored by the financial institution. If you use a pay-by-phone account (such as a credit card or electronic funds withdrawal), the date reported on the statement of the financial institution showing when payment was made is the date of payment. If you contest a tax liability and are a cash basis taxpayer, you can deduct the tax only in the year you actually pay it (or transfer money or other property to provide for satisfaction of the contested liability). Therefore, keep good records, make sure the taxes are paid in the year you want to deduct them and that the tax is actually imposed on you when you deduct them. Also, be aware that taxes are a preference item for the Alternative Minimum Tax and that you may lose the deduction in whole or in part if you are already in the Alternative Minimum Tax or the taxes you paid put you into the Alternative Minimum Tax.

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