30 Jan Changes Afoot in Property Tax Writeoffs
Beginning in the 2012 tax year, property owners will be required to break down payments into deductible and non-deductible portions when they file their tax returns with the Franchise Tax Board. This could be a serious wakeup call for property owners, shaving thousands off their deductions.
The change has nothing to do with new taxes or laws, but rather a new Franchise Tax Board computer system being installed in 2012. Until that system is up and running, the state’s tax department has no way of differentiating between deductible and non-deductible portions of property tax payments. Since property owners typically deduct the total amount of their property tax bill – or the 1098 amount provided by their mortgage company – the state has lost millions each year. Mello-Roos in Orange County alone accounts for more than $200 million of non-deductible amounts expected to be written off for tax year 2011. That’s $200 million new taxable dollars the state expects to collect revenue on once the computers are up and running later this year.
The Franchise Tax Board has made the announcement early in the year so taxpayers can adjust withholdings for the year. It also allows taxpayers and preparers the time they’ll need to ensure the proper documentation is at hand come time for filing for tax year 2012.