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By James Tan | Broker in Elk Grove, CA

In 2012, FTB will not allow mello-roos tax deduction on schedule CA

In the Franchise Tax Board's website under "Understanding the Real Estate Tax Deduction" (  https://www.ftb.ca.gov/individuals/Real,Estate_Tax_Deduction/index.shtml), FTB says that starting 2012 California will not allow deduction of additional taxes which are for local benefit, such as mello-roos taxes.

Beginning with your 2012 California tax return, the reporting requirements for real estate tax deductions will change. This will include reporting your property parcel number, deductible, and nondeductible amounts. Keep a copy of your property tax bill(s) to report this information on your return.

California law conforms to federal law regarding real estate tax deductions. You should use the same real estate deduction amount on both federal and state tax returns. Individuals who itemize deductions can claim deductions for real estate tax on Schedule A of their federal individual income tax return. You are allowed to deduct only the amount of real estate tax paid during the year that is based on the assessed value of your property and that is not for a local benefit that tends to increase the value of your property.

You cannot deduct any amounts shown on your property tax bill, including special assessments, special taxes, fees, or charges that are not computed based on the assessed value of your property, regardless of their purpose.

A typical property tax bill will include the following:

Parcel #: 111-1111-11-0000

Assessed value: $200,000

In this example, $2,040 is deductible property tax.

DescriptionTax Rate/PhoneTax AmountTotal
County Wide1%2,000.00 
College Gov.020%40.00 
Total Tax on Net Value (Ad Valorem)$2,040.00
Community College800-111-1111190.00 
Water Fees800-111-111310.00 
Total Direct Levy/Special Assessments$1,000.00
Total Property Tax$3,040.00


By Clientwhys,  Fri Apr 20 2012, 10:50
The issue is even more complicated for California tax professionals that followed the FTB Property Taxes guidance. Do they now have to amend these returns? If yes, how is the state going to handle all of those new returns? Did tax professionals lose clients because of the error?


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