Are Real estate tax penalties and interest deductable?

no

My reaction is to agree with sally tax and say no. But I have not been able to come up with a definitive resource that says no. I've come up with resources that hit all around the topic and lead me to believe the answer is no, but so far nothing squarely on point. IRC Section 162(f) is one example of a source that's close but no cigar.

Since I can't find anything really definitive, I'm starting to wonder if a case could be made for it on the grounds that it's similar to late payment charges on home mortgages which are deductible as mortgage interest. And maybe the answer would be yes for the property tax penalties but no for the property tax interest, or vice-versa.

While I agree with sally that the answer has to be no, so far I just can't prove it. Maybe someone will help us.

Penalties imposed by government entities are never deductible. However, interest on real estate taxes are on a debt secured by real estate and are a form of a mortgage. Similar to the loan payment of the sewer improvment. Penalties on late mortgage payments are a form of mortgage interest and are deductible as mortgage interest. In both cases be sure to indicate that it was not reported on a 1098.

For TackleDave: Can you provide references for your statements? I'm not necessarily disagreeing with you at this point anyway. It's just that I can't any official source to back up the rules you cite. So far I've come up dry.

Part of the problem as usual is that we're fact-deprived. I assumed that the original post was asking about property taxes on a residence, but it actually could be referring to business or investment real estate. Without specific facts, we're probably just spinning our wheels here, and it looks as though the original poster has lost interest in the topic anyway.

While I say I'm not necessarily disagreeing with you, I guess in fact I really am disagreeing because absent any authority to the contrary, I would not handle these inputs the way you outlined. But given the original poster's disinterest and the paucity of facts, it's unlikely we'll be able to settle any disparities in the way we would approach these issues. Unless this discussion attracts some earthshaking revelations soon, I'm pretty much moving on.

Penalties for late payment are NOT deductible nor is the interest [deductible] imposed by the county for late payments. I can not immediately recall where I read this, but it does "make sense." Why should a taxpayer be allowed to get a deduction for these fees when it is their fault that the fees were incurred?

the interest charged on delinquent property taxes is interest on the period of time the taxes are delinquent and has nothing to do with realestate secured qualified mortgage interest.therefore the interest becomes personal and subsequently not deductible.

Hello Happy Tax,

In answer to your question (and I have NOT lost interest!), this is personal residential real estate property. The taxpayer is a co-signer on a loan; his sister did not pay the taxes for 4 years. He has now taken over the property, and paid all of the taxes, including the interest and penalties. The taxpayer (my client) is treating the property as a second home, although at this point we could also consider it an investment property, as this matter dates back to the tax year he assumed responsibility for the property (2005), and we have not filed an amended return yet.

I DON'T SEE HOW THIS PROPERTY COULD BE CONSIDERED INVESTMENT PROPERTY SINCE IT APPARENTLY WAS NOT HELD FOR THE PRODUCTION OF INCOME.I HAVE BEEN THROUGH THIS ISSUE DURING I R S AUDITS.THE IRS PUBLICATIONS ARE A GOOD START FOR DOING RESEARCH.