Sometimes it pays to procrastinate. In a surprise gift to taxpayers, the State of California office that collects taxes announced Friday that most kinds of property tax are fully deductible on 2011 income tax returns.
The change could cost the state $200 million, board spokesman Daniel Tahara said. Individual property owners could gain a few hundred dollars each in new deductions.
The last-minute announcement reverses a campaign that the California Franchise Tax Board launched in November 2011. In press releases and on its website, the tax board told taxpayers that they could only deduct from their income taxes those property taxes that are based on the assessed value of their real estate.
In addition to these “ad-valorem” taxes, most property owners also pay flat-rate taxes – taxes that are the same for all property owners regardless of whether the property is a tiny shack or a gigantic mansion. These types of property tax are not deductible from income taxes, the tax board said.
One example is “vector control,” assessments to pay for government efforts to control pests such as mosquitoes. Another is “Mello-Roos” assessments (special taxes for improvements to roads, libraries and emergency services).