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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
Satisfied Customers: 581
Experience:  10 years experience
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I recently came into an insurance settlement. If I use it to

Customer Question

I recently came into an insurance settlement. If I use it to pay 5 years back property taxes on income properties all at once is there any way to deduct the interest in future years or would I be better off only paying enough to result in a zero income? Will there be any additional penalties in paying them over several years, besides (6% ?) interest? The only risk I see is if I spend the money on something else and can not pay them in the future. Is this correct?
Submitted: 7 months ago.
Category: Tax
Expert:  Mark Taylor replied 7 months ago.

Hi my name is***** will be happy to help you with your questions.

Expert:  Mark Taylor replied 7 months ago.

Are the properties owned individually?

Customer: replied 7 months ago.
I am the sole owner.
Expert:  Mark Taylor replied 7 months ago.

I am sure that you itemize. You would be able to pick up the property tax amounts on your schedule A.

Expert:  Mark Taylor replied 7 months ago.

The interest would not be deductible.

Expert:  Mark Taylor replied 7 months ago.

If you pay them over time I am sure that they would accrue penalties and interest on the unpaid balance.

Expert:  Mark Taylor replied 7 months ago.

How much do you owe in property taxes? What is your income?

Customer: replied 7 months ago.
I owe around 70K in back property taxes which have been operating at a loss in the 6 years I've owned the properties. I've recently got a job doing in home health care for some tenants and am grossing 350 dollars every two weeks but have picked up an additional client for around half that so it will be around 1150 per month and may be taking on another additional client/ tenant as well. Unfortunately the home health care is tied to the rentals or I'd let them go back for taxes.I didn't think there would be any additional penalties other than the ones already accumulated. Are you sure?. Sewer is the biggest problem because the penalties are 30% and then it's added to the property taxes when I don't pay it.Is there any way to deduct the tax in future years if I were to pay it all at once? Since we are already talking about interest and penalties it doesn't appear so but I just want to make sure before we continue talking about interest and penalties.
Expert:  Mark Taylor replied 7 months ago.

Are these rental properties?

Expert:  Mark Taylor replied 7 months ago.

What state and county are you in?

Customer: replied 7 months ago.
San Bernardino county in California.
Expert:  Mark Taylor replied 7 months ago.

The penalty is 1 1/2 % a month.

Expert:  Mark Taylor replied 7 months ago.

Are these rental properties?

Customer: replied 7 months ago.
1.5% a month is a pretty steep penalty. Is there any way to pay off the taxes now and claim the remaining expense in future years income?Yes They are rental properties.. Two houses and a 32 unit apartment complex that was boarded up when I bought it for 50K. I currently have 10 units habitable and live in one of them while my girlfriend and her mother live in another. The town and area are very depressed and rents are low. What money I make from the houses goes into trying to keep the apartment complex afloat which has been a real money pit.
Expert:  Mark Taylor replied 7 months ago.

Unfortunately, there is no way to pay the tax now and spread the expense over the years. From your description it sounds like the rental properties are producing a tax loss. In most cases a rental loss is limited to $25,000 on your individual return. So, if your rental properties on your tax return are breaking even or producing a small loss you would be able to spread the benefit of the $70,000 payment over 3 years. The exception would be if you are being treated as a real estate professional. If you meet the qualification of a real estate professional then your loss from rental activities would not be limited.

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