In year 1, Peter and Shaline Johnsen moved into a home in a new sub division....

In year 1, Peter and Shaline Johnsen moved into a home in a new sub division. Theirs was one of the first homes in the subdivision. In year 1, they paid $3,600 in real property taxes to the local government, $1,240 to the developer of the subdivision for an assessment to pay for the sidewalks, and $1,400 for real property taxes on land they hold as an investment. What amount of property taxes are the Johnsens allowed to deduct assuming their itemized deductions exceed the standard deduction amount before considering any property tax deductions?

Expert Solution

Homeowners who itemize their tax returns can deduct property taxes they pay on their main residence and any other real estate they own. This includes property taxes you pay starting from the date you purchase the property. The official sale date is typically listed on the settlement statement you get at closing.

Certain items on your real estate property tax bill may look like taxes but are actually miscellaneous charges that are not deductible. These include:

Fees for the delivery of a service, such as water, or trash collection

Flat fees to satisfy fines, such as a charge to mow your lawn that wasn't compliant with local law

Assessments for local benefits, such as a charge to construct a sidewalk outside your house..........

.And for Investement property, property taxes are also deductibe...No matter what kind of real estate business you are in, you can deduct all of the mortgage interest and property taxes paid on your investment properties.

So, the following deduction will be allowed:-

$ 3600 taxes paid for residential property and $ 1400 taxes paid for Investment Property, i.e. total $ 5000.

And $1,240 to the developer of the subdivision for an assessment to pay for the sidewalks, will not be allowed as stated above.

ekkarill92 answered 2 years ago

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