If the seller paid them and you reimbursed them for it I don't think so but you may want to check with your tax person to be sure. If you did take the deduction I think the future risk of or with an audit is minimal.Hey,
Bought my first DVC contract last year and paid the buyer all 2015 annual fees. Do you think I can deduct the property tax portion? If so how would I figure out the portion?
If you reimbursed the buyer for the 2015 annual fees as part of your closing, it sounds to me like it is deductible. I would do it in your situation but I am not a tax expert and do not know if there are other IRS rules that override the one quoted above.You can deduct real estate taxes imposed on you. You must have paid them either at settlement or closing, or to a taxing authority (either directly or through an escrow account) during the year.
To take the deduction technically I suspect the contract would have to specify the division of taxes, just reimbursing for the dues without addressing the taxes directly likely wouldn't technically qualify to deduct them but I can see either side of that argument.According to IRS Publication 530 (https://www.irs.gov/publications/p530/ar02.html#en_US_2015_publink100011838):
If you reimbursed the buyer for the 2015 annual fees as part of your closing, it sounds to me like it is deductible. I would do it in your situation but I am not a tax expert and do not know if there are other IRS rules that override the one quoted above.
You could contact the seller and be sure they're not deducting them as well. A simple phone call to the effect that you're deducting them since you reimbursed for the fees and wanted to make sure they didn't do so also. Regardless I think the risk is dramatically small in this situation.I didn't pay the dues directly to DVC, rather reimbursed the seller for the total amount. Since I prepare my own taxes, I'm unclear of the IRS rules on this. I suppose the safe play is to just forget it this year.
I agree. The IRS has bigger fish to go after than someone who takes a $100 property tax deduction that he/she is entitled to take but who may not be able to produce a closing statement with the property tax reimbursement broken out. It would cost the IRS much more money to audit someone for this than the tax and penalty they might recover.Regardless I think the risk is dramatically small in this situation.
Personally, I wouldn't bother with this. I would pro-rate the property tax and deduct the amount pertaining to the time I owned the contract. The seller should do the same. If the seller deducts the entire amount, that is their mistake and should not prevent me from taking the deduction I'm entitled to take. I wouldn't feel comfortable contacting the seller to discuss tax deductions.You could contact the seller and be sure they're not deducting them as well.
I think the worst part, besides the $25 plus penalties and interest, would be the simple fact that you'll have to go through the audit. And, once they find a discrepancy, they can start opening up previous years. The audit alone could cost you thousands.I would say take the deduction. If you get audited, the worst they will do is disqualify the deduction and you'll owe them $25 or so you would get for taking the deduction.
Just curious what it is about a $100 property tax deduction that you think would be a red flag to the IRS that could trigger an audit?I think the worst part, besides the $25 plus penalties and interest, would be the simple fact that you'll have to go through the audit. And, once they find a discrepancy, they can start opening up previous years. The audit alone could cost you thousands.
I didn't say I thought it would trigger an audit. I was responding to a post that assumed the "worst case" was repaying the taxes owed if you are audited. Audit's can be triggered for any number of reasons. But, if the IRS finds something they think is an error, they will likely increase the scope and duration of the audit. You may have only made one single $25 error, but that correspondence audit will turn into an office or field audit. And the one-year audit could turn into a three-year audit.Just curious what it is about a $100 property tax deduction that you think would be a red flag to the IRS that could trigger an audit?
If taking a deduction for the property tax paid on our DVC contracts is an audit trigger, we are all subject to being selected for an audit and nobody should claim the deduction for fear of being audited. I cannot recall a single report here of someone being selected for an audit due to taking this deduction.
Guess who charges by the hour when you need help dealing with the IRS.The guy who did them gave me some advice:
I guess we'll just have to agree to disagree on the issue of deductions. When it comes to taxes, I pay what I owe but I see no reason to pay more than I owe. If I'm entitled to a deduction and I have the documentation to back it up, I take it. I've never had an issue with the IRS due to deductions I've taken.Guess who charges by the hour when you need help dealing with the IRS.