We live in a tax-happy city, in a tax-happy state: California. While most of you may be aware that state or local taxes are deductible, there are still tips – especially for record-keeping. As we approach 2016 tax season, here are some tips and pointers about deductibility from a practical perspective.
- Keep Records. The deductibility of taxes means little if you don’t know what taxes you paid, and (if you are ever subject to an IRS audit), you can’t prove that you actually paid the taxes. Property taxes are among the easiest, as most mortgage companies automatically deduct property taxes from your mortgage payments and keep records (that are cross-reported to the IRS).
- State Property Taxes Are Deductible, Too. California has some of the highest income taxes in the nation, and these state taxes are deductible. If we’re preparing your returns for both California and the Federal Government, this can’t be easier – as our tax software will automatically optimize this issue.
- Other Taxes. While fees are not deductible (consider, for example, a “dog license” fee paid to the city of San Francisco), taxes are. So your motor vehicle taxes would be deductible. Again – you’ll need to keep records, such as a cancelled check if you ever need to prove this.
We have many international clients who pay international taxes; for example, Canadians who earn income in San Francisco and are subject to Canadian income taxes. International tax situations are complex – so we can’t make any blanket issues about deductibility. However, if you are an expatriate looking for an expatriate tax service in San Francisco, we do a lot of this type of international tax. In those situations, we can advise you not only on the record-keeping requirements but also on compliance issues and on whether your taxes paid to your home country would be tax deductible at all.
So, while nothing is certain except death and taxes, the deductibility of taxes is somewhere in the middle. If you are looking for a top-rated San Francisco tax service as we approach tax season, reach out to us for a free consultation.