With April 15th looming be careful what you deduct in regard to your property. The state of California put the word out to property owners in California in January that the state Franchise Tax Board will be cracking down on taxpayers who deduct Mello-Roos and other property-related fees that aren’t legally deductible from state income taxes.
However, taxpayers will get a break of sorts as state tax officials now say that they will have to rely on taxpayer honesty in reporting property tax deductions, as they have in the past, because the FTB computer is not able to connect to county tax records to verify compliance.
Honesty or not, some taxpayers maintain complete unawareness of the difference between property taxes and property-related fees that appear on a tax bill.
For example, the Mello-Roos fees can run into the thousands of dollars a year for many property taxpayers, but these fees cannot be deducted on income taxes.
Be sure to ask a licensed professional such as a CPA, EA, etc for specific answers.
For a full explanation of how the deductible rules apply to property taxes, CLICK HERE.
We posted a property tax bill prepared by the Franchise Tax Board showing a typical breakdown for the deductible and non-deductible portions of the bill. Note that an item is deductible when it has a tax rate assigned to it.