If, for example, my lease calls for me to pay $100 a month (to the
owner) and pay all the real estate taxes directly to the town, can I
deduct them? (thw owner niehter pays them, nor deducts them)
If, for example, I own property jointly (50-50), but the owners have
an agreement such that the occupying owner pays 100% of the real
estate taxes while occupying the property, can that person deduct 100%
of the r/e taxes.
Assuming you are in business, you should deduct the real estate taxes as
rent expense. The owner should record the real estate tax you paid as an
expense and a corresponding equal amount of additional rental income.
Same answer as above.
Even if you are an individual leasing the property for personal use, the
property tax you pay - as an owner or partial owner of the property - are
deductible on Schedule A.
If you operate a business from that property (no personal use at all) then
the amount paid to occupy that space is deductible.
Would a "pure renter" paying the landlord's tax assessment directly be
able to deduct that in comparison as if were member of an association
Couldn't decide when I read the OP's question whether the two were the
same situation restated or two separate cases...
If you are asking about personal use property that you rent:
A lessee does not have an ownership interest even if the lease
states that the lessee is to pay the property taxes. Without an
ownership interest, you can not deduct the taxes you paid.
If you are asking about property you rent used for a trade or
A lessee can deduct the property taxes paid as additional rent
When you own property jointly, you have an ownership interest. As
such, if you pay the taxes, you can deduct the amount you paid.
In article ,
So in a case like that, would it make sense for the lessee to buy 1%
of the property, so as to make the taxes deductible? (In order for
the purchase not to be a sham, it could be specified that it will be
repurchased at 1% of the property's FMV at the time of sale.)
I find nothing in the law that specifies how much of an ownership
interest is required to become liable for the payments. I would
assume that your 1% interest would make the "owner" liable to the
county for the tax payments if the majority owner did not pay.
That opens up a whole other can of worms. Give the existing (not to mention
the prior) mortgage situation, any change in ownership might be cause for a
change in loan structure too. An existing owner might not want some 1%
owner mucking up the gears with potential encumbrances of their 1%, etc.
Paul Thomas, CPA
"Harlan Lunsford" wrote
Re-reading what I wrote and it came out sounding stupid. I was thinking of
a recent court case involving equitable ownership. In the case I recall,
the non-owner parents could deduct the interest and taxes they paid on
If you're part owner of an entity whose business activity it is to rent the
space, and you just happen to be one (or the exclusive) renter, then chances
are the deduction would be at the entity level.
Code section 164 says, "Except as otherwise provided in this section,
the following taxes shall be allowed as a deduction for the taxable
year within which paid or accrued:
(1) State and local, and foreign, real property taxes."
Except for the case of tax apportionment between buyer & seller
(164(d)), it says that the payer can deduct the tax. I could find
nothing that says that only the owner (that person against whom the
taxes are assesed) could deduct the taxes.
I do not receive any benefit to the deduction for r/e taxes. If my
son pays my taxes for me, can he deduct them? Do I even need to sell
him a 1% interest in the property???
I feel a bizarre urge to turn this discussion into a table or
flow-chart... I think I'll lie down until it passes. ;-)
Here's what I've picked up or sub-consciously interjected so far:
1. tax payments made in lieu of rent are treated just like rent (on both
sides of the transaction). The owner has rental income (and rental
expense that cancels it out, Pub 527, "Expenses paid by tenant"), the
renter may or may not have a deduction.
2. ad valorem taxes on real estate you own are always deductible on
Schedule A "Taxes You Paid" if not otherwise deducted against a passive
activity or business/trade activity.
3. Pub 527: "If you own a part interest in a rental property, you can
deduct your part of the expenses that you paid".
4. If you have joint ownership for purposes other than "merely to share
expenses", it is a partnership (Pub 541).
The OP isn't asking whether the real estate taxes are deductible, only
by whom, and against what activity. We need to know what type of
activities the owner and renter are engaged in, and what the partnership
agreement (if any) contains.
I realize I'm not quoting actual tax statutes here, but is the goal to
evaluate IRS pubs vs. tax law, to help a real-life client avoid taxes,
or to resolve the mechanics of how something is reported?
Here is the short, correct answer. If you are making personal use of
the property, the real estate taxes are NOT deductible because from
your perspective, paying them is the same as paying rent.
If you are making business use of the property, real estate taxes ARE
deductible because from your perspective, paying them is the same as
The correct answer comes as no surprise: IT DEPENDS.
A contract purchaser whose name is on neither the
mortgage nor the deed may, in some circumstances,
deduct the real estate taxes.
Keep in mind that this is taxation where facts and
circumstances prevail over logic - because if it
was logical, they couldn't call it taxation.
Right. However if he had an agreement whereby the son paid his
property taxes and he agreed that, on his death or when the property is
sold the son will be paid, the son has an equitable ownership interest
in the property. It would have to be structured carefully to avoid it
being considered only a security interest to assure repayment. But if
done properly I imagine that the son might be able to get the
The Sec. 164 regs state that a real estate tax is a tax imposed
on interests in real property.
In addition, there is a general rule (I have no citation but
there are numerous tax cases) that says a taxpayer's payment of
another person's obligation is not deductible.