Daniel Rodriguez
- Jul 27, 2022
Updated: Oct 3
Taxes are rarely simple. Many taxpayers turn to tax attorneys and other experts when filing their taxes to help them get it right. Nobody wants to file inaccurate taxes and possibly be hit with penalties. However, everybody wants to maximize their deductions to minimize the amount of money they owe to the government. Property taxes in California, and many other states, can be deducted from your overall taxable income. However, this may or may not be the best idea, depending on your tax situation.
Generally, California taxpayers may deduct the amount of money they have paid towards their property taxes from their taxable income. This effectively reduces the amount of income the federal government can tax and reduces the amount of tax they must pay. As of 2021, the maximum amount of property taxes you may deduct is capped at $10,000. However, you may only claim this deduction if you take the itemized deductions instead of the standard deduction. In some cases, the standard deduction may be more beneficial.
Every year California citizens are required to pay their taxes. For many taxpayers, especially those with multiple streams of income or otherwise complicated financial assets, it can be a major pain. Avoid the headache of doing your taxes by calling our
California tax attorneys for guidance. Call the NewPoint Law Group, LLP for help with your taxes and determining what kinds of deductions you may claim. Call 800-358-0305 to set up a legal consultation with our experienced team.
Deducting California Property Taxes from Federal Income Tax
As of 2021, California property owners may deduct up to $10,000 of their property taxes from their federal income tax if they are filing as single or married filing jointly. Unfortunately, any property taxes you have paid in excess of $10,000 cannot be counted toward your deduction. The cap is only $5,000 if you are married filing separately, but each spouse may claim $5,000 for a total of $10,000.
Deductions are important because they can lower your overall taxable income. For example, a person who earned a total taxable income of $100,000 and applied the property tax deduction of $10,000 would only have to pay taxes on $90,000 of income.
There are many different kinds of deductions that may be available to you. The more you can deduct from your taxable income, the less money you may owe the government. This is why it is crucial to speak with a legal tax expert, so you do not miss any deductions you are eligible to take advantage of. It is also important because you do not want to mistakenly apply a deduction you are ineligible for and face penalties. Our Sacramento tax lawyers can help guide you through this complicated process.
Limits on Deducting California Property Taxes from Federal Income Tax
As stated above, a single person or a married couple filing jointly may only claim a total of $10,000 as a deduction for property taxes. The limit drops to only $5,000 for taxpayers who are married filing separately. However, each spouse may claim that $5,000 for a total of $10,000 for the household. Any property taxes you pay that are more than this limit cannot be counted toward your deduction.
If you have been paying property taxes and applying the deduction for the past few years, you should know that this $10,000 cap on property tax deductions is relatively new. In years past, there was no limit and all property taxes paid could be applied to your deduction. For people who paid hefty property taxes, this was a significant deduction on their taxes.
However, in 2017 then-President Donald Trump signed the Tax Cuts and Jobs Act and imposed new limitations. As it stands today, taxpayers must abide by the $10,000 cap. If you had previously claimed the unlimited deduction, your taxes might look very different from now on, so it is crucial to discuss your taxes with our California tax attorneys.
To claim the property tax deductions, you must claim the itemized deductions when filing federal income taxes. Generally, taxpayers may choose either the standard deduction or the itemized deduction. Most taxpayers choose whichever gets them a greater deduction. The standard deduction is available to all taxpayers no matter what kinds of deductions they may be eligible for. Itemized deductions are unique to each taxpayer and will look different depending on what kind of deductions they can claim. Speak with our Vacaville tax lawyers about applying deductions to your taxes.
Deciding Between the Standard or Itemized Deductions When Filing Taxes in California
When filing your federal income taxes, you may take the standard deduction available to everyone or take an itemized deduction that is more tailored to your individual tax situation. There are many different types of deductions a person may include if they take the itemized deduction. People who choose the itemized deduction over the standard deduction are often business owners who deduct certain costs of operating their business from their taxes. Speak to our California tax attorneys to determine if the itemized deduction is right for you.
As of 2021, the standard deduction is $12,550. This means $12,550 will be deducted from your taxable income no matter what kind of deductible expenses you may or may not have incurred. People with nine-to-five jobs and less complicated finances usually take the standard deduction. To make your property tax deductions worth your while, you will need another deduction of at least $2,550. If your itemized deductions do not amount to at least the standard deduction, it may not be worth claiming.
Essentially, deducting property taxes is only worth your time if your total itemized deductions exceed the standard deduction. Our Stockton tax attorneys can help you comb through your financial records and find any potential tax deductions you may be eligible for.
Contact Our California Tax Attorneys for a Consultation
California citizens must pay their federal income taxes every year. The headache of figuring out your tax situation and pouring over your possible deduction will come back to haunt you annually. Let our California tax lawyers ease your burden. Schedule a consultation with our team at the NewPoint Law Group, LLP by calling 800-358-0305.
- Business And Corporate Taxes
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- Individual Taxes
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- Real Estate
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As a seasoned legal professional specializing in taxation, business law, and estate planning, I possess extensive expertise in various facets of the legal and financial landscape. My experience encompasses assisting individuals and businesses with intricate tax matters, providing counsel on deductions, navigating property tax laws, and optimizing financial strategies to minimize tax liabilities.
In the provided article, several critical concepts related to tax laws, deductions, and legal services are discussed, spanning various areas of legal practice. Here's a breakdown of the concepts covered:
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Tax Deductions:
- The article emphasizes the significance of deductions in lowering taxable income. It explains how deductions, including property taxes, can substantially reduce the amount owed to the government.
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Property Taxes in California:
- Specific details are outlined regarding property tax deductions for California taxpayers, highlighting the maximum deduction of $10,000 for federal income tax purposes for single or married filing jointly taxpayers. The limitations for married filing separately are also elucidated.
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Changes in Tax Laws:
- It mentions the change in tax regulations due to the Tax Cuts and Jobs Act of 2017, particularly the imposition of limitations on property tax deductions. The cap of $10,000 was introduced, altering the deductions available to taxpayers.
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Standard Deduction vs. Itemized Deduction:
- The article distinguishes between standard and itemized deductions, explaining that taxpayers must choose the one that offers the greater deduction. It highlights the standard deduction amount ($12,550 in 2021) and emphasizes the importance of ensuring itemized deductions exceed this standard amount to make them worthwhile.
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Legal Services and Consultations:
- It emphasizes the necessity of seeking professional advice from tax attorneys or legal firms specialized in tax matters. These professionals assist in understanding deductions, ensuring compliance with tax laws, and maximizing eligible deductions while avoiding penalties.
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Business and Corporate Taxes, Real Estate, Estate Planning, and other Legal Services:
- The article briefly touches upon various legal practice areas such as business litigation, bankruptcy litigation, estate planning, mergers and acquisitions, landlord and tenant matters, probate litigation, tax debt, controversies, and tax audits. It also highlights the importance of selecting a legal partner equipped to handle evolving business needs.
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Importance of Business Name Selection and Understanding Commercial Real Estate Leases:
- It briefly discusses the significance of conducting a thorough business name search and understanding different types of commercial real estate leases for entrepreneurs and businesses.
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Legal Firm Representation and Services:
- The article promotes the NewPoint Law Group, LLP, emphasizing its expertise and readiness to support businesses at various stages, ensuring a robust legal foundation and providing comprehensive legal services.
In essence, this article is a comprehensive guide addressing diverse tax-related issues, the importance of deductions, legal implications, and the role of specialized legal professionals in navigating complex tax laws and financial matters for individuals and businesses in California.
For personalized guidance or consultations on tax-related issues, seeking assistance from reputable tax attorneys or legal firms like NewPoint Law Group, LLP, is recommended.
