Entering real estate taxes on Form 1041 in ProSeries

Follow these steps to enter real estate taxes on Form 1041:

1. Open the client return.
2. Go to Form 1041.
3. Scroll down to Line 11 - Taxes.
4. Enter any deductible taxes paid or incurred during the tax year that aren't deductible elsewhere.
5. Scroll back up to the Deduction Allocation Smart Worksheet.
6. Use the worksheet to enter any taxes.

Deductible taxes

Deductible taxes include the following:

• State and local income taxes.
  • You can deduct state and local income taxes unless you elect to deduct state and local general sales taxes. You can't deduct both.
• State and local general sales taxes.
  • You can elect to deduct state and local general sales taxes instead of state and local income taxes. Generally, you can elect to deduct the actual state and local general sales taxes (including compensating use taxes) you paid in the tax year if the tax rate was the same as the general sales tax rate. However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax, even if the tax rate was less than the general sales tax rate.
  • Sales taxes on motor vehicles are also deductible as a general sales tax if the tax rate was more than the general sales tax rate, but the tax is deductible only up to the amount of tax that would have been imposed at the general sales tax rate. Motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Also include any state and local general sales taxes paid for a leased motor vehicle.
  • Don't include sales taxes paid on items used in a trade or business. An estate or trust can't use the Optional Sales Tax Tables for individuals in IRS Pub. 600 to figure its deduction.
• State, local, and foreign real property taxes.
• State and local personal property taxes.
• Foreign or U.S. possession income taxes.
  • You may want to take a credit for the tax instead of a deduction. See the Instructions for Form 1041 - Schedule G, line 2a for more details.
• The generation-skipping transfer (GST) tax imposed on income distributions.

Nondeductible

Don't deduct the following:

• Federal income taxes,
• Estate, inheritance, legacy, succession, and gift taxes, or
• Federal duties and excise taxes,