• Suite 200, 1708 Peachtree St. NW, Atlanta, GA 30309. 404-607-8400
  • 1516 Village Harbor Drive, Lake Wylie, SC 29710. 803-831-0263
  • 404-607-8400 & 803-831-0263

Condominium’s Tax-Equivalency Payemnts Deductible as Real Estate Taxes

On January 19, 2015 posted in Specialty Tax Services Blog

Condominium’s Tax-Equivalency Payemnts Deductible as Real Estate Taxes

CONDOMINIUM’S TAX-EQUIVALENCY PAYMENTS DEDUCTIBLE AS REAL ESTATE TAXES.

The IRS has recently clarified an important issue for real estate developers– payments in lieu of taxes, sometimes called PILOT or tax equivalency payments—are deductible from federal taxes. The issue arises when a local government acquires property with public bonds and then leases the property to real estate developers as part of an economic development program. Because the local government owns the property, it is exempt from property taxes, but frequently the local government requires the developer to make payments in lieu of taxes. When confronted with these facts, the IRS ruled that payments made by a condominium developer to its landlord, a governmental fund, can be deducted as real estate taxes. That also means that when the developer sells condominium units, each unit buyer also should be able to deduct their proportionate share. Click here to read the IRS ruling.