[slomoe1954]

Although the IRS Publications can be helpful, they can be misleading and are not authoritative. Treasury Regulations are authoritative. Here is what they say about interest on real property assessments.

[I]Reg §1.164-4. Taxes for local benefits.
Effective: Reg. §1.164-4 predates P.L. 99-514, 10/22/1986, the Tax Reform Act of 1986.

(a) So-called taxes for local benefits referred to in paragraph (g) of § 1.164-2, more properly assessments, paid for local benefits such as street, sidewalk, and other like improvements, imposed because of and measured by some benefit inuring directly to the property against which the assessment is levied are not deductible as taxes. A tax is considered assessed against local benefits when the property subject to the tax is limited to property benefited. Special assessments are not deductible, even though an incidental benefit may inure to the public welfare. The real property taxes deductible are those levied for the general public welfare by the proper taxing authorities at a like rate against all property in the territory over which such authorities have jurisdiction. (b) (1) Insofar as assessments against local benefits are made for the purpose of maintenance or repair or for the purpose of meeting interest charges with respect to such benefits, they are deductible. In such cases, the burden is on the taxpayer to show the allocation of the amounts assessed to the different purposes. If the allocation cannot be made, none of the amount so paid is deductible.[/I]

The local benefits referred to in paragraph (b)(1) are streets, sidewalks, and similar construction projects. Both repairs to and interest related to such local benefits are deductible according to the regulations. There is no requirement that the interest be related to the repairs.