California limits property tax deduction to…well, taxes
![property-tax[3]](http://firsttuesdayjournal.com/wp-content/uploads/property-tax3-575x382.jpg)
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Did you report nondeductible taxes on your 2011 return?
- No (79%, 41 Votes)
- Yes (21%, 11 Votes)
Total Voters: 52
This article examines the FTB’s recent attempt to enforce property tax deduction limitations for 2012 state tax returns – and the backlash from the IRS and some members of the California Assembly.
The loophole
California presently conforms to federal income tax deductions for property taxes, allowing deductions for ad valorem taxes paid by homeowners. Ad valorem taxes areset based on property values determined by county assessors.
However, many homeowners get away with taking deductions based on that the total payment made each year to the county tax collector, which often includes other monetary obligations,such as:
- improvement district assessments;
- Mello-Roos bonded indebtedness; and
- direct levies, fees and charges that are clearly not ad valorem taxes.
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loading...About The Author
Carrie B. Reyes
is lead writer in charge of the Real Estate Practice and Due Diligence and Disclosures books.
Latest CommentsLeave a Reply
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April Article of the Month: California limits property tax deduction to…well, taxes
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CA is broke and has found a way to recover monies that are owed. Have them collect the tax from the illegal deductions. If people want to deduct all legal property taxes, then the real estate agent should inform the buyer that they are limiting their options since they are not including properties that have Mello Roos. Or better yet, have the real estate agent explain Mello-Roos and the FTB ruling.
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As a property owner, I see the logic here. However, there are several grey areas: assessments for schools (at all levels), assessments for fire districts, etc. These are all services nominally provided by “property taxes,” but which the state or county has failed to provide in an effective manner; thence the increased assessment to cover the services. Is this deductible?
As a practical matter, as an income tax preparer, I am usually presented with the 1098 the taxpayer receives from the lien-holder. The “property taxes” paid by the lien-holder are not differentiated. Are lien-holders also going to be required to make this distinction in their paperwork?
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The developers have to put in the improvements that cities requires them to ( and are usually necessary for approval), a form of taxation that is passed on to the homeowners
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