Don’t miss the potential tax deductions hiding in your Chapter 13 plan payments. The same, very important debts that your Chapter 13 plan pays are often tax deductible. And you are still the person who’s paying, even if the trustee writes the check.
Here are some common deductions lurking in the Chapter 13 disbursements:
Mortgage interest: If your Chapter 13 plan is catching up on delinquent mortgage payments, the claim of the lender is probably mostly interest.
Taxes: Property taxes paid through the plan should be deductible. Likewise, state income taxes paid by the trustee are deductible.
Business expenses: If you operate a business in Chapter 13 or operated one before you filed, you may be paying business leases, sales taxes, or vendor debt through the plan.