Question

How do I capture Community Development Authority taxes paid? I have been told the interest portion should be deductible similar to mortgage interest.

Forum|Forum|5 years ago
March 28, 2021
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I receive a bill twice each year for something called "Community Development Authority" (CDA). The bill is a bit over $1K per year and the majority of that right now is in interest (~90%) so being able to deduct it could make a big difference in my overall taxes, especially as this will continue to be paid for the next 30 years (unless I decide to pay it off early). The CDA administrator stated that it is their understanding that our "CDA special assessments are treated like a home improvement loan for IRS tax deduction purposes. As a result, the interest portion of your annual special assessment is deductible for the year that it is paid."

How would I capture this in my taxes? The CDA administrator provided a breakdown of the Principal, Interest, and Administrative Expenses, so I know how much to report in interest, I just don't know where or how it should be input into TurboTax.

DMarkM1

According to the IRS Publications if you can determine what portion of your assessment paid is for maintenance or repair or interest charges, you can deduct that portion as property tax. The part of the assessment that is for construction is not tax deductible. Here is an extract below for more information.

Assessments for local benefits.

You can’t deduct amounts you pay for local benefits that tend to increase the value of your property. Local benefits include the construction of streets, sidewalks, or water and sewer systems. You must add these amounts to the basis of your property.

You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. An example is a charge to repair an existing sidewalk and any interest included in that charge.

If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction.

If you can’t show what part of the assessment is for maintenance, repair, or interest charges, you can’t deduct any of it.

An assessment for a local benefit may be listed as an item in your real estate tax bill. If so, use the rules in this section to find how much of it, if any, you can deduct.

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