Normally in Maryland Property tax charged by county consists of Front foot fee in addition to normal property taxes. These are tax deductible as it comes as part of 1099 issued by Mortgage company. These charges are for extending water, sewer lines to the property. In my new construction area the county has allowed builders to use their own collection companies to collect them. Seems county wants to get out of the business of collecting these charges as they are really incurred by builders or who ever doing such work. These are normally for 23 years. Will these be tax deductible even tough paid to private collection agencies?
It may be "normal" on your bill, but not on mine, where there's no such charge.
Nothing is deductible because it's on the form the lender sends you. All that shows is how much the lender paid the taxing authority. You have to look to your tax bill to see what's deductible. Only taxes based on the value of the property and applicable to all properties are deductible as property taxes. See IRS Publication 17.
No, they're not dedutible for the reasons stated above. They add to your basis in the property. In my new construction area there was a separate lien payable to the utility lender for 30 years.
It may be that it is a good thing this isn't a fee based on value since we've been told since childhood that we should "put our best food forward" which implies making our more valuable foot be our front foot .
... Oh, wait. That's not it...
Phil's right. This water & sewer lines extension fee adds to basis and is not currently deductible.
Bill Brown wrote in news: snipped-for-privacy@f29g2000yqa.googlegroups.com:
Just confirming, in my case (Anne Arundel County) there has never been such a charge in our property tax bill. There has been a separate bill for sewage capital expense from City of Annapolis. IIRC both bills were paid out of escrow account required as condition to our house purchase note, but that of course isn't a tax deduction determination.
Not so fast, Rajesh - just because its on the 1098 (NOT a 1099) doesn't mean its right. Some counties in Maryland also include a REFUSE or TRASH fee on the property tax bill, that isn't deductible either. And neither is the Front Foot Assessment.
Correct - they are how the county recoups the cost of extending those utilities to your home. A few years back Anne Arundel County offered "NEW" home buyers an option in at least 2 neighborhoods - pay a discounted amount up front and never see that Front Foot Assessment on your property tax bill again OR forego the upfront payment and spread the cost over several years. I don't recall the exact details, but 23 years sounds about right.
Keep in mind that in order for a tax to be deductible it has to be based on the VALUE of item it is assessed against. Drivers in Virginia get to deduct part of the car registration because they pay personal property tax to VA based on the value of the car. Here in Maryland your registration fees are based on the car's GVW or GVWR. This has nothing to do with the value of the vehicle so it isn't deductible here.
FFAs work the same way. When your subdivision was developed someone incurred the cost of providing hook up to certain public utilities. The costs of those hooks are now either being recouped OR a sinking fund was established to provide for their eventual replacement - neither of which has anything to do with the value of the house or property. Hence, Front Foot Assessments, like Trash/Refuse/Dump fees, are NOT deductible.
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