State tax deductibility of all Mello-Roos charges threatened beginning tax year 2012

[bearishgurl]

New guidelines for the real estate tax deduction

Beginning with the filing of your California tax return for 2012, you are required to file an itemized report on any real estate tax deductions you claim, as well as include the parcel number and amounts that can or cannot be deducted.

Deductions may be claimed for state, local and foreign real estate taxes based on the property’s assessed value, called ad valorem taxes. Charges on the tax bill unrelated to property taxes and local government maintenance of offsite improvements are not deductible.

Deductions may not be claimed for:
■ amounts included in the tax bill for local benefits which increase the value of the parcel assessed;
■ special assessments and fixed charges such as assessment district bond payments and zoning violation fees and penalties;
■ itemized charges for services incurred in maintenance on the site of the parcel;
■ transfer taxes or stamp taxes; and
■ rent increases due to property tax increases.

Amounts billed with property taxes for benefits locally received are deductible if they are for the maintenance, repair or interest charges related to offsite improvements such as sidewalks, streets, water lines, sewer lines, irrigation and other similar improvements. This excludes local offsite improvements that increase the value of the property (and thus its assessed value).

To analyze your local county property tax bill, look up a sample tax bill for each county from the Franchise Tax Board’s (FTB’s) webpage, Understanding the Real Estate Tax Deduction.

(emphasis added)

see: http://firsttuesdayjournal.com/new-guidelines-for-the-real-estate-tax-deduction-2/

[Coronita]

You know, for a lot of people. It doesnt matter really. Because a lot of folks get hit with AMT anyway, where deductions from taxes aren’t used to compute the AMT.

[no_such_reality]

They’re not threatened. They have never been permItted but people claim
Them anyway. Kind of like the vehicle fees.

[enron_by_the_sea]

[quote=flu]You know, for a lot of people. It doesnt matter really. Because a lot of folks get hit with AMT anyway, where deductions from taxes aren’t used to compute the AMT.[/quote]

You are right for Federal AMT but I believe you can still deduct property tax on CA return even if you fall under federal AMT…

There is such a thing as CA-AMT too. Luckily for me, I am yet not there 🙂 L)

[UCGal]

Sure you couldn’t legally deduct mello roos in the first place… but most folks did.
Now the state will be able to look at your itemized bill since you have to provide that info along with your parcel number.

For those of us that live in non HOA areas… it seems like it might apply to various bond measures as well.

For example – from my bill:

FIXED CHARGE ASSMTS: PHONE
CWA WTR AVAILABILITY 858-522-6900 10.00
VECTOR DISEASE CTRL 800-273-5167 6.20
MWD WTR STANDBY CHRG 866-807-6864 11.50
MOSQUITO SURVEILLANC 800-273-5167 3.00

Would probably NOT be deductible anymore.
Looking at the other bonds- which are tied to the value of the house – it appears they are not neighborhood specific, so probably still deductable.

[Coronita]

I’m pretty sure CA is not going be looking much at anyting.

You really think CA has enough auditors to be auditing? They can barely process the tax returns on time with all the budget cuts.

[bearishgurl]

[quote=UCGal] . . . Looking at the other bonds- which are tied to the value of the house – it appears they are not neighborhood specific, so probably still deductable.[/quote]

UCGal, I thought the same thing about these smallish (“universal” charges) when reading this. It appears the 1% tied to the property’s assessed value is the “ad-valoream” portion of the tax bill and will continue to be deductible.

[Coronita]

[quote=UCGal]Sure you couldn’t legally deduct mello roos in the first place… but most folks did.
Now the state will be able to look at your itemized bill since you have to provide that info along with your parcel number.

For those of us that live in non HOA areas… it seems like it might apply to various bond measures as well.

For example – from my bill:

FIXED CHARGE ASSMTS: PHONE
CWA WTR AVAILABILITY 858-522-6900 10.00
VECTOR DISEASE CTRL 800-273-5167 6.20
MWD WTR STANDBY CHRG 866-807-6864 11.50
MOSQUITO SURVEILLANC 800-273-5167 3.00

Would probably NOT be deductible anymore.
Looking at the other bonds- which are tied to the value of the house – it appears they are not neighborhood specific, so probably still deductable.[/quote]

…Ooooooooh a total of $31 that can’t be deducted…. 🙂 You probably could inflate your charitable contributions by that amount if you wanted.

(Not directing this at you… Just I think the deductibility of a lot of things I think are miniscule for a lot of people….

Now if you happen to live in 4S or Scripps paying $400/month for Mello Ruse(sic)…Well, yah I guess you’re kinda screwed.

[Coronita]

[quote=enron_by_the_sea][quote=flu]You know, for a lot of people. It doesnt matter really. Because a lot of folks get hit with AMT anyway, where deductions from taxes aren’t used to compute the AMT.[/quote]

You are right for Federal AMT but I believe you can still deduct property tax on CA return even if you fall under federal AMT…

There is such a thing as CA-AMT too. Luckily for me, I am yet not there 🙂 L)[/quote]

lucky you.

[enron_by_the_sea]

The funny thing is, as a owner-occupier you can’t deduct property taxes (because of AMT), Mello-Roos (see above). There seems to be universal consensus between economists on the right and left that Mortgage interest deduction is a giveaway, so I guess that is going away in 2013 too!

But if I just started renting this place out, I can deduct all of it (property taxes, HOA, Mello-Roos, Mortgage interest..) on schedule E.

So flu, you and I should sell each-other our house and then rent it out on a long lease. That way we can side step all these tax issues

🙂 🙂 🙂

[briansd1]

Enron, that does really work because you’d have rental income which you didn’t have before.

[bearishgurl]

[quote=flu]I’m pretty sure CA is not going be looking much at anyting.

You really think CA has enough auditors to be auditing? They can barely process the tax returns on time with all the budget cuts.[/quote]

This is not rocket science, flu. All the FTB has to do is set their software up to trigger line 73? on Form 540, if filled, and if the scanned tax bill is not included with the return and an explanation of what is deductible and non-deductible, that return will be set aside and flagged for a letter to the taxpayer and/or refusal of the entire property tax deduction and a new tax calculated.

Obviously, they will have to have workers to go thru the mailed Form 540’s by hand (small percentage?), as well as biz returns filed by mail to flag the returns which did not include the proper paperwork for a property tax deduction.

Shorter Form 540’s (ES/EZ etc) don’t take itemized deductions so they are exempt from review.

I have no doubt there will be new forms invented by tax year 2012 to assist the CA taxpayer with itemizing their property tax deductions.

This is a big potential source of income to the state and they have been asleep at the switch all these years letting taxpayers get by with claiming improvement bonds that were not part of their “property taxes” to claim.

[briansd1]

As some people might say, enforce the laws already on the books.

[no_such_reality]

OCR. Simple scan, compare, flag deviation for free money and penalties.

[Coronita]

[quote=briansd1]Enron, that does really work because you’d have rental income which you didn’t have before.[/quote]

Not if you rent it out at cost (cost being mortgage interest + prop tax + hoa + mello + depreciation), also you can probably tack on a lot of repair, improvements etc.

[Author]

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