Question

To what extent would the following taxes be deductible by Married Couple under § 164?

The City of Oz constructs a yellow brick road that runs past Woodman’s property. He and other property owners adjacent to the road are assessed varying amounts by Oz, based on the relative amounts of front footage of their properties. Woodman elects to pay off the assessment over five years and pays $400 in the taxable year. Deductible?

Answer 1

IRC 164 - As a general rule allows that all "state and local" taxes paid on the "real estate property" and "personal property" shall be allowed as deduction. However there are few things to be kept in mind -

1) Limited deduction - A maximum 10,000 (for married filing jointly) or 5000 for (married filing individually)

2) This deduction will be allowed in the year in which tax was paid or accrued.

Hence in this case the deduction is allowed subject to a maximum $10,000.