- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Deductions & credits
I'm a little worried about your CPA and your EA. Regardless, the fact that you may have improperly deducted some capital items will drastically muddy the waters if you wanted to use the "tax benefit" rule.
This comes into play if you listed an item as a schedule A deduction, that was not an allowable deduction and should have been a capital expense, but you got no actual tax benefit because of the SALT cap. You might be able to argue that since you got no tax benefit from the deduction, and it should have been a capital expense instead, you would be allowed to add it to the cost basis, because its not double dipping if you got no benefit because of the SALT cap. But you've already muddied the waters there considerably. Not only would you have to examine every charge on the property tax bill to determine if it was a deductible tax or a capital expense, you would then have to analyze every tax return to see if you got a tax benefit from the deduction. And if you owned the property before 2018, there was no cap on SALT in 2017 and earlier, so that affects the tax benefit calculation.
The tax assessor is not going to give you tax advice as to whether a charge is a schedule A deduction or a capital expense. You would have to ask them what the charge is actually for (if it's not obvious from the bill) and then determine for yourself whether it is a property benefit or a community benefit.
I think you need to let it go. Only property benefits would be allowed to be added to the cost basis, and since you did not keep track, and listed everything on schedule A, you have a lot of work to do to determine if anything that you previously listed, can be added to the cost basis without being accused of double dipping or having to amend your prior returns to reduce the deductions. It's up to you if you want to put in the work. If you decide to make the adjustments, keep records of all your investigations and calculations for at least 6 years in case of audit.
State and local real property taxes
Deductible real property taxes are generally any state or local taxes on real property levied for the general public welfare. The charge must be uniform against all real property in the jurisdiction at a like rate.
Many states and counties also impose local benefit taxes for improvements to property, such as assessments for streets, sidewalks, and sewer lines. In general, local benefits taxes are deductible only if they're for maintenance, repair, or interest charges related to those benefits. See Taxes for local benefits in Chapter 11 of Publication 17.