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Understanding the Real Estate Tax Deduction

Did you know that not all real estate taxes are deductible? To determine what is, you will need a copy of the taxpayers’ property tax bills. Real estate tax is an allowable itemized deduction for federal and state income tax, and 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. The FTB recently developed a webpage that provides additional real estate tax information. Beginning with the 2012 tax return, the FTB says it may 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.

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