Many California homeowners routinely deduct their entire property tax bill on Federal and State tax returns. Those homeowners are in for a surprise. Federal law prohibits deducting certain taxes and fees. Taking the full deduction reduces state and federal taxes and guess what; they want every cent they can get. To be deductible, a property tax must be a percentage of the home’s assessed value. Any tax that is a flat fee or an itemized charge for services assessed against specific property is not deductible. Nondeductible items are things such as Mello-Roos or Community Facilities districts, 1915 assessment district bonds, schools or college bonds, water, sewer, police, fire, libraries and a few more. The franchise tax board is making every effort to educate California homeowners to follow the law and stop deducting the entire amount of their property tax payment. The Franchise tax board had planed to change the 2011 tax returns by adding 3 lines asking homeowners for their parcel number, the amount of property taxes paid and the nondeductible amount. They had a change of heart and decided to make an all out effort to get property owners to understand what is deductible and not deductible. Below is a link to lean more.

What property taxes are deductible and what are not.