Nancy paid the following taxes during the year: Nancy sold her personal residence on June 30,under an agreement in which the real estate taxes were not prorated between the buyer and the seller.What amount qualifies as a deduction from AGI for Nancy?

Question

Nancy paid the following taxes during the year:  Nancy sold her personal residence on June 30,under an agreement in which the real estate taxes were not prorated between the buyer and the seller.What amount qualifies as a deduction from AGI for Nancy?

Quizplus · Accepted Answer

The total amount of taxes paid by Nancy is $11,900. However, since the real estate taxes were not prorated between the buyer and the seller, Nancy can only deduct the taxes paid for the period of time during which she owned the property. Assuming a 365-day year, Nancy owned the property for 181 days (January 1 to June 30). Therefore, the amount of real estate taxes that qualify as a deduction from AGI is calculated as follows:

$11,900 × (181 ÷ 365) = $5,920

In addition to the real estate taxes, Nancy can also deduct the $1,462 in state income taxes she paid during the year, for a total deduction from AGI of $7,382 ($5,920 + $1,462). Therefore, the correct answer is C) $7,382.

Nancy Paid the Following Taxes During the Year: Nancy