Understanding the Real Estate Tax Deduction
Did you know that not all real estate taxes are deductible? To be able to determine what is deductible and non-deductible, you will need a copy of the taxpayers’ property tax bills.
Real estate tax is an allowable itemized deduction for both federal and state income tax. California conforms to federal law regarding real estate tax deductions. You should use the same deduction amount on both the federal and state tax returns.
Generally, only the amount based on the assessed value of the taxpayers’ property is deductible. These amounts are commonly referred to as ad valorem or general tax levy on property tax bills. For most counties, the deductible amount is identified on property tax bills as the assessed value multiplied by an associated tax rate percentage.
Most property tax bills also include non-ad valorem special assessments, special taxes, mello-roos, direct levies, fees, and charges that are nondeductible. For most counties, these amounts are identified on the tax bills as amounts that do not include a tax rate percentage.
Note: A few county property tax bills do not show tax rate percentages for items that may be deductible. However, sample property tax bills located on our webpage highlight the deductible and nondeductible amounts.
We have developed a webpage that provides additional real estate tax information. This information includes:
- How to review property tax bills to identify deductible and nondeductible amounts.
- Items deductible and nondeductible.
- Links to county websites for taxpayers to access their specific property tax bills, if available.
- Links to samples of all county property tax bills that identify deductible and nondeductible amounts.
- Links to all county tax collector contact information to request duplicate tax bills, if needed.
Beginning with the 2012 tax return, we may also include reporting requirements related to real estate tax deductions. You may be required to report the property parcel numbers and the deductible and nondeductible amounts from taxpayers’ property tax bills. You will need copies of your clients’ property tax bills to report this information.
For more information on understanding the real estate tax deduction, go to ftb.ca.gov and search for real estate tax.