Hello, Redeemable ground rents are indeed deductible. The issue is that the TurboTax software does not allow for this type of scenario... at least that I can figure out so far.
Publication 530 - IRS.gov (click on link for more information):
Redeemable ground rents. If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. The ground rent is a redeemable ground rent only if all of the following are true.Ground rent. In some states (such as Maryland), you may buy your home subject to a ground rent. A ground rent is an obligation you assume to pay a fixed amount per year on the property. Under this arrangement, you are leasing (rather than buying) the land on which your home is located.
- Your lease, including renewal periods, is for more than 15 years.
- You can freely assign the lease.
- You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specified amount.
- The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled.
