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I'm a full time salaried employee living in Center City Philadelphia. I own my own home and I am wondering if the Center City District Tax can be deducted from my federal taxes on the Schedule-A form under real estate taxes. My feeling is that the tax can be included with my real estate tax since it is billed yearly and required.

Here are some relevant links:

  1. Center City District Website

  2. Schedule-A Instructions

  3. Publication 530 - Tax Information for Homeowners (PDF)

From Pub. 530: "Most state and local governments charge an annual tax on the value of real property. This is called a real estate tax. You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. The pro­ceeds must be for general community or gov­ernmental purposes and not be a payment for a special privilege granted or service rendered to you."

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My basic rule of thumb is that if the the bill come from a government office of taxation, and that if you fail to pay the amount they can put a tax lien on the property it is a tax.

for you the complication is in Pub530:

Assessments for local benefits. You cannot 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 cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot 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.

I have never seen a tax bill that said this amount is for new streets, and the rest i for things the IRS says you can deduct. The issue is that if the Center City tax bill is a separate line or a separate bill then does it count. I would go back to the first line of the quote from Pub 530:

You cannot deduct amounts you pay for local benefits that tend to increase the value of your property.

Then I would look at the quote from the CCD web site:

The Center City District (CCD) is a business improvement district. Our mission is to keep Philadelphia's downtown, called Center City, clean, safe, beautiful and fun. We provide security, cleaning and promotional services that supplement, but do not replace, basic services provided by the City of Philadelphia and the fundamental responsibilities of property owners.

CCD also makes physical improvements to the downtown, installing and maintaining lighting, > signs, banners, trees and landscape elements.

and later on the same page:

CCD directly bills and collects mandatory payments from properties in the district. CCD also receives voluntary contributions from the owners of tax-exempt properties that benefit from our services.

The issues is that it is a business improvement district (BID), and you aren't a business:

I did find this document from the city of Philadelphia explain how to establish a BID:

If the nature of the BID is such that organizers wish to include residential properties within the district and make these properties subject to the assessment, it may make sense to assess these properties at a lower level than a commercial property, both because BID services and benefits are business-focused, and because owner-occupants often cannot treat NID assessments as tax-deductible business expenses, like commercial owners do. Care must be taken to ensure that the difference in commercial and residential assessment rates is equitable, and complies with the requirements of the CEIA.

from the same document:

Funds for BID programs and services are generated from a special assessment paid by the benefited property owners directly to the organization that manages the BID’s activities. (Note: many leases have a clause that allows property owners to pass the BID assessment on to their tenants.) Because they are authorized by the City of Philadelphia, the assessment levied by the BID becomes a legal obligation of the property owner and failure to pay can result in the filing of a lien.

I have seen discussion that some BIDS can accept tax deductible donations. This means if a person itemizes they can deduct the donation. I would then feel comfortable deducting the tax because:

  • they can place a lien on your property if you don't pay
  • Voluntary contributions are deductible, for instance from tax-exempt property owners.
  • Business can deduct it.

If you can't deduct it that would mean the only people who can't deduct it are home owners.

So deduct it. (keep in mind I am not a tax professional)

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  • I asked the CCD directly if I could deduct 100% and received the following response. "Owners do include 100% since the CCD started in 1991, but we have not been given an official ruling from the IRS."
    – ADH
    Apr 7, 2015 at 20:00

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