Rental property real estate tax credit card fee - deductible?

I am considering using a credit card to pay the property taxes due on

2 of my rental properties. Doing so will allow me to meet the spending thresholds for a couple of frequent flyer benefits.

It is also a (slightly) more convenient payment method than mailing a personal check (and never receiving an actual receipt) or paying in person.

The county tax office charges a 2.3% "convenience fee" for online credit card payments.

Under these circumstances, is the convenience fee deductible as part of the property tax payment?

Reply to
Ian Pilcher
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Even if it's not, it should be deductible as an ordinary and necessary business expense. If the properties werent rentals, that would not be the case.

Reply to
Stuart O. Bronstein

I guess my question is about the "necessary" part. After all, I could (and usually do) pay my property taxes with a check, avoiding the "convenience" fee. I'm only considering using the credit card this year to meet a minimum spend threshold for some frequent flyer benefits, which are entirely unrelated to the rental properties.

I did post my original question before I found IR-2009-37, however. It's obviously not directly comparable, but it does lend weight to the view that the IRS isn't doesn't care about one's reasons for using a credit card to make tax payments.

Reply to
Ian Pilcher

They use the phrase "ordinary and necessary," but it's not the ordinary use of the word "necessary." There is nothing wrong with borrowing money to pay business debts - it's done all the time whether the business could otherwise afford to pay cash or not. So I wouldn't worry about it.

Under the law, credit card miles and similar credits would be taxed as ordinary income. The IRS has decided not to do that for various reasons. So they've already determined that what you are doing is OK as far as they are concerned.

Reply to
Stuart O. Bronstein

Adding more color to Stu's response and quoting from a non-authoritative part of irs.gov:

"To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary."

Ira Smilovitz, EA

Reply to
ira smilovitz

Before you pay a 2.3% "convenience fee" to anybody for anything, check really carefully to see if your jurisdiction will let you pay the taxes by some sort of ***free*** electronic check or debit or online charge system.

For me, a 2.3% fee is a deal breaker. I would walk to the county court house, if needed, to avoid being charged *money* for paying what I owe...

Reply to
lotax

In article you write:

As the orig>> I'm only considering using the credit card this year to meet a minimum spend threshold for some

It's quite common to have a valuable benefit that kicks in at a spending threshold, e.g., free upgrades and lounge access in an airline or hotel program. The benefit is easily worth more than 2.3% of the incremental amount needed to get to the threshold.

(ObTax: I hope those benefits aren't taxable.)

R's, John

Reply to
John Levine

If you look back at my original post, you'll see that I did this in order to meet a credit card spending threshold for some frequent flyer benefits. Like you, I would never pay a 2.3% fee for "convenience."

Reply to
Ian Pilcher

I concur. But I will not let someone dip their hand into my bank accounts.

I just checked on my county's property tax payment methods:

free, via e-check

2.3% via credit card $3.95 flat fee for VISA consumer DEBIT card

Of course, you need to consider the perks in using your credit card: miles, cash rewards, etc. My credit card gives me 2% cash back, so that softens the blow.

I do pay everything I possibly can via credit card, without a convenience fee. I love receiving the instant receipt for my records and not having the occasional payment go astray.

Reply to
Taxed and Spent

I had a $1000 spending threshold to get 60,000 bonus miles on an airline card. I went to my grocery store, and bought $1000 in store gift cards. Enough to cover maybe 2 months of groceries. If your normal reward is even worth 2%, this is a $30 net cost per $10,000 charged. Up to you, but most of us would find another way to hit the threshold.

Reply to
JoeTaxpayer

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