topic <deleted> in Deductions & credits

TardyTax — Sun, 27 Sep 2020 15:11:00 GMT

Re: Are back taxes on a property deductible?

MinhT1 — Tue, 30 Jun 2020 19:17:46 GMT

Yes, back property taxes are deductible in the year you actually paid them. However, penalties and interest are not deductible.

Re: Are back taxes on a property deductible?

AmeliesUncle — Tue, 30 Jun 2020 22:16:56 GMT

Just to clarify for any future readers:

They are deductible because YOU were the one that were originally owed the taxes.

But a common scenario involves somebody buying a property that somebody else did not pay their taxes. In that scenario, they would NOT be deductible because YOU weren't assessed those taxes. Instead, paying off those taxes would essentially increase your purchase price (Basis).

Re: Are back taxes on a property deductible?

Opus 17 — Tue, 30 Jun 2020 22:26:37 GMT

You must have been the owner when the taxes were assessed. Then, any property taxes you pay are deductible as of the date paid, regardless of what year they were incurred. However, there is still a $10,000 cap on all state and local taxes as itemized deductions.

If you bought the property and must pay back taxes to clear the title, that is treated for tax purposes as an increase in the purchase price, and may reduce your capital gains in the future, but is not deductible.