Q: Are taxes paid owed for a previous year fully deductible in year paid?
I am a disabled senior and my wife works part time. We were notified we owe taxes to IRS & CA FTB for 2014. Both tax agencies have tacked on penalty's and interest. If we pay them both off this year in full, what can we deduct off this years taxes? All of it? Just the tax that was owed and the interest? Just the tax that was owed & paid? None of it? What if we do an offer in compromise? CA has now garnished my wife's pay, is the amount they take deductible?
A: Real estate taxes paid are deductible in the year paid. Late fees, penalties and intertest charges are generally not deductible. Talk to a California tax lawyer.
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