Question

In year 1, Peter and Shaline Johnsen moved into a home in a new subdivision. Theirs was one of the first homes in the subdivision. In year 1, they paid $1,500 in real property taxes on the home to the state government, $500 to the developer of the subdivision for an assessment to pay for the sidewalks, and $700 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?

Answer 1

Answer:

The Johnsens may deduct $2,200 of property taxes as itemized deductions. This includes the $1,500 paid in property taxes on their home and $700 in property taxes paid on land they are holding as an investment. However, taxpayers are not allowed to deduct fees paid for water and sewer services, and assessments for local benefits such as streets and sidewalks. Thus, the Johnsens may not deduct the $500 assessment fee to pay for sidewalks