Business Services Industry
Taxes on state property tax reduction program.
Kiplinger Tax Letter, The, July, 2002
A state's real estate tax reduction program runs afoul of the IRS. A state law lets folks over 60 work off up to $500 of their property taxes if they "volunteer" services to municipalities. The credit is calculated by multiplying the number of hours served by state's minimum-wage rate.
Amount of the tax relief is taxed as income, IRS headquarters says in a private ruling. The abatement is received in exchange for services. The issue went to the IRS national office after state officials complained about earlier rulings that indicated that the rebates would be taxable.
FICA tax is also due, according to IRS. If the municipality pays the seniors' portion of FICA for them, that sum also is taxable income.
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