Interest assessed on delinquent property taxes

[DexEA]

Taxpayer paid previous years delinquent property taxes with the interest portion only just under $20,000. I can't think of any reason the interest paid could be deducted.

Would anyone disagree?

[peggysioux]

Interest assessed on delinquent property taxes

If it was business/rental property, would the interest be deductible? I would say that interest would not be deductible for personal residence but unsure if business/rental property. I have the same situation, but for rental property and I was trying to determine if deductible as well.

[JohnH]

Business or rental - interest would be deductible (but not penalties)

Personal - interest would not be dedutible (and penalties not deductible as well)

[DexEA]

Not Rental; not Business; not deductible; sucks to be her! And she took it out of her IRA - 10% penalty applies too!

[Jiggers]

Another comment about the interest that is deductible as a business expense on delinquent property taxes for a business, be sure that the interest is stated separately from the penalty. In my area, the penalty, interest, and legal fees are combined as a % of the delinquint property taxes.

Without the allocation, I always show this amount as a non-deductible expense.

[Gary2]

What happens if a municipality gives a discount for early payment? Do the people who pay on the regular due date lose out, because the difference between the discounted amount and regular amount is effectively interest?

What happens if the municipality simply states a set of dates and amounts, without calling it interest? In other words, "If you pay by June 1, it's $100; by July 1, it's $105, by August 1, it's $110.50, etc.?"

And the real example: What about a senior forgiveness program of the sort "We understand your situation now, just sign an agreement and won't require you to pay anything until you (or your your heirs) sell the house, and when that happens, here's how it's calculated."

Keep in mind that all of these amounts are ad valorem, since they're ultimately based on the value of the property. That they're also based upon time period doesn't remove the ad valorem nature.

[taxea]

http://www.irs.gov/publications/p535/ch04.html