(a) In general. Only the following taxes shall be allowed as a deduction under this section for the taxable year within which paid or accrued, according to the method of accounting used in computing taxable income:
(1) State and local, and foreign, real property taxes.
(2) State and local personal property taxes.
(3) State and local, and foreign, income, war profits, and excess profits taxes.
(4) State and local general sales taxes.
(5) State and local taxes on the sale of gasoline, diesel fuel, and other motor fuels.
In addition, there shall be allowed as a deduction under this section State and local and foreign taxes not described in subparagraphs (1) through (5) of this paragraph which are paid or accrued within the taxable year in carrying on a trade or business or an activity described in section 212 (relating to expenses for production of income). For example, dealers or investors in securities and dealers or investors in real estate may deduct State stock transfer and real estate transfer taxes, respectively, under section 164, to the extent they are expenses incurred in carrying on a trade or business or an activity for the production of income. In general, taxes are deductible only by the person upon whom they are imposed. However, see § 1.164-5 in the case of certain taxes paid by the consumer. Also, in the case of a qualified State individual income tax (as defined in section 6362 and the regulations thereunder) which is determined by reference to a percentage of the Federal income tax (pursuant to section 6362 (c)), an accrual method taxpayer shall use the cash receipts and disbursements method to compute the amount of his deduction therefor. Thus, the deduction under section 164 is in the amount actually paid with respect to the qualified tax, rather than the amount accrued with respect thereto, during the taxable year even though the taxpayer uses the accrual method of accounting for other purposes. In addition, see paragraph (f)(1) of § 301.6361-1 of this chapter (Regulations on Procedure and Administration) with respect to rules relating to allocation and reallocation of amounts collected on account of the Federal income tax and qualified taxes.
(b) Taxable years beginning before January 1, 1964. For taxable years beginning before January 1, 1964, except as otherwise provided in §§ 1.164-2 through 1.164-8, inclusive, taxes imposed by the United States, any State, territory, possession of the United States, or a political subdivision of any of the foregoing, or by any foreign country, are deductible from gross income for the taxable year in which paid or accrued, according to the method of accounting used in computing taxable income. For this purpose, postage is not a tax and automobile license or registration fees are ordinarily taxes.
(c) Cross references. For the definition of the term “real property taxes”, see paragraph (d) of § 1.164-3. For the definition of the term “foreign taxes”, see paragraph (d) of § 1.164-3. For the definition of the term “general sales taxes”, see paragraph (f) of § 1.164-3. For the treatment of gasoline, diesel fuel, and other motor fuel taxes, see § 1.164-5. For apportionment of taxes on real property between seller and purchaser, see section 164(d) and § 1.164-6. For the general rule for taxable year of deduction, see section 461. For provisions disallowing any deduction for the tax paid at the source on interest from tax-free covenant bonds, see section 1451(f).
[T.D. 6780, 29 FR 18145, Dec. 22, 1964, as amended by T.D. 7577, 43 FR 59357, Dec. 20, 1978]
Notes of Decisions
Cited in
43
cases, 1959–2016 · leading case:
Hynes v. Comm'r, 74 T.C. 1266 (Tax Ct. 1980).
Hynes v. Comm'r, 74 T.C. 1266 (Tax Ct. 1980).
· cites it 4× “Held, further , P and his wife are not entitled to deduct real estate taxes of T since such taxes were not imposed on them.”
Hillsboro Nat'l Bank v. Comm'r, 460 U.S. 370 (1983).
“*392 In evaluating this argument, it is instructive to consider what the tax consequences of the payment of a shareholder tax by the corporation would be without § 164(e) and compare them to the consequences under § 164(e).”
Cramer v. Comm'r, 55 T.C. 1125 (Tax Ct. 1971).
· cites it 2× “Section 164 allows a deduction for real property taxes; but they are, in general, "deductible only by the person upon whom they are imposed.”
Synanon Church v. Comm'r, 57 T.C.M. 602 (Tax Ct. 1989).
· cites it 2× “The evidence indicates that the vehicles were used to some extent in the Adgap business and in petitioner's rental and investment *398 activities.”
Waxenberg v. Comm'r, 62 T.C. 594 (Tax Ct. 1974).
· cites it 4× “1 Section 164(a)(1) of the Code allows a deduction for foreign real property taxes paid if they are imposed by the authority of a foreign country unless such taxes are assessed against local benefits of a kind tending to increase the value of the property assessed and unless…”
Plotkin v. Comm'r, 2011 T.C. Memo. 260 (Tax Ct. 2011).
· cites it 2× “However, we have held that taxpayers who do not hold legal title to property but who establish they are equitable owners of the property are entitled to deduct property taxes they paid for the property.”
Steinert v. Comm'r, 33 T.C. 447 (Tax Ct. 1959).
· cites it 2× “Section 164 of the Internal Revenue Code of 1954 provides that, with certain exceptions not here material, there shall be allowed as a deduction taxes paid or accrued within the taxable year.”
Blackburn v. Comm'r, 38 T.C.M. 1048 (Tax Ct. 1979).
· cites it 2× “68 Generally, section 164 allows a deduction for real estate taxes only to the extent they were imposed on the taxpayer, and section 163 allows a deduction for interest paid on a mortgage where the taxpayer is the legal or equitable owner of the real estate. Secs. 1.164-1(a) and…”
Blanche v. Comm'r, 2001 T.C. Memo. 63 (Tax Ct. 2001).
· cites it 2× “164-1(a), Income Tax Regs. ; Loria v. Commissioner, T.C. Memo 1995-420 .”
Robertson v. Comm'r, 2000 T.C. Memo. 100 (Tax Ct. 2000).
· cites it 2× “Generally, personal property taxes are only deductible by the taxpayer upon whom they are imposed. See sec.”
Daya v. Comm'r, 2000 T.C. Memo. 360 (Tax Ct. 2000).
· cites it 2× “PROPERTY TAXES Section 164 allows a deduction for certain taxes, including State and local real property taxes.”
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