Are underpayment penalty and interest (state MI) deductible in year paid (ie 2015 penalty paid in 2016)?

posted

No, penalty and interest for state income taxes are not deductible but the amount you paid for the tax is.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Any chance we can get the source indicating that interest assessed for underpayment of a prior year's state income tax is not deductible? While I agree, the CPA says that this is wrong (i.e., he claims that the interest assessed and paid for underpayment of prior year state income taxes IS deductible). Would love to have a section of the IRC, and IRS Revenue Ruling, Instructions, or any other source to refer the CPA to!