Find tax deductions in Chapter 13 payments

by Cathy Moran, Esq.

February 21, 2008

Don’t overlook payments your Chapter 13 trustee has made in your case last year when preparing your 2007 tax return. Lurking in the list of creditors being paid by the trustee may well be tax deductions to which you are entitled.

My analysis says that payments the trustee makes as your agent according to a confirmed plan are just as much payments you made as payments for which you actually wrote the check. If the claim is one that would have been deductible to you if you made it, it should be deductible if you pay it via the trustee.

Depending on the facts, the trustee may be paying mortgage interest, if your plan included defaulted mortgage payments; taxes, if there are priority claims; support, if you were behind on spousal support; or business expenses, if a failed business triggered your filing.

Run these ideas by a tax professional. Judge Learned Hand reminds us “there is nothing sinister in so arranging affairs as to keep taxes as low as possible.”

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Cathy Moran, Esq.

I'm a certified specialist in bankruptcy law (California State Bar Board of Legal Specialization) practicing in the San Francisco Bay Area for more than 30 years. In addition to practicing bankruptcy law, I train new practitioners at Bankruptcy Mastery.

Last modified: February 21, 2008