Deductibility of state real estate excise tax

No. It's a real estate transfer tax, not deductible under Sec. 164. Add it to the basis of the property.

Katie in San Diego

No. It adds to your basis of the home.

However, check line 5 IF it qualfies as a sales tax and your state income tax is less.

Thanks for the replies. Can you elaborate on how this relates to "basis"?

Washington doesn't have an income tax, so I've checked 5B (general sales tax) & used the IRS's online calculator come up with a figure to enter there. How can I determine if the excise amount qualifies as a sales tax? Would I simply add the entire amount to the figure I got online?

Thanks!

Dan

========================================= MODERATOR'S COMMENT: Please trim away all un-needed boilerplate

No, no, no. The tax is NOT a general sales tax. It is a real property transfer tax. Not deductible.

The transfer tax (and other purchase costs, such as appraisal fees, escrow fees, etc.) is added to the amount you paid for the property to calculate your basis in it. For example, if the purchase price of the property was $100,000, and your nondeductible costs total $2,000, your basis in the property is $102,000.

Katie in San Diego

This needs to be tweaked a bit. Appraisals and other costs of getting a loan are not part of basis. They're just additional costs that have no tax effect now or later. See IRS Publication 551.

Well, there I go shooting from the hip again *sigh*. A bad example. Thanks for the catch, Phil.

Katie