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Taxes, Taxes, Oh Those Persistent Taxes: Second Home Levies (Again!)

California’s second home tax could be on the table again in 2018.

STATEWIDE — Call it cliché to identify taxes as one of life’s two guarantees, but hey, the act of transferring personal income to the government also functions as a source for steady content, be it as a news report or editorial column. There will never be a shortage of tax stories to write about or discuss for as long as media exists. In this go around of Standing Watch we look ahead to the state of taxation in California for 2018 – particularly with respect to proposals to eliminate second home tax benefits.

A lawmaker from San Francisco proposed Assembly Bill 71 (AB 71) in December 2016. The bill, which didn’t progress far during the 2017 legislative session in Sacramento, would have eliminated second home tax benefits altogether in the name of raising funds for affordable housing initiatives.

Boats qualify as a “second home,” particularly for anyone whose vessel is not a primary resident. Boat owners who primarily live in a terrestrial residence, accordingly, would not be able to deduct their respective vessels for tax purposes, should AB 71 become law.

“California law allows taxpayers to deduct the mortgage interest paid on up to $1 million in debt for a principal and second residence. A second residence is limited to a home that is either not rented out at any point in the year or one that the taxpayer can rent out but must also live in for part of the year,” a legislative analysis of AB 71, conducted in June, stated.

“Taxpayers can deduct mortgage interest from both their federal and state tax liability. According to the Franchise Tax Board (FTB), the mortgage interest deduction resulted in approximately $5 billion in revenue loss for 2016-17,” the legislative analysis continued.

Legislators could reconsider AB 71 during the next legislative calendar, which launches in a few weeks – meaning boaters dodged a bullet in 2017 but will again have to worry about the prospect of being taxed for owning their boats once 2018 arrives.

This, of course, parallels a similar proposal in Washington, D.C., were the House of Representatives sought to do away with second home tax deductions.

Second home tax deductions have certainly been a benefit for boat owners, so the parallel state and federal proposals to do away with the deduction is certainly a bright blip on the boating community’s radar.

Boating and fishing advocacy groups such as Recreational Boaters of California and California Sportfishing League have campaigned against AB 71 during its initial run through the legislative process. It’s unclear what influence, if any, boating and fishing lobbyists had on the failure of AB 71 to make it to Gov. Jerry Brown’s desk before the end of the 2017 legislative session, but the bill’s advocates will have another chance to move it forward once the calendar flips the page to 2018.

So what did AB 71 propose to do, specifically?

Assembly member David Chiu’s bill would have eliminated the ability to use mortgage interest payments on qualified second homes as a deduction on state income tax. All taxes collected on such mortgage interest payments, broadly speaking, would have used to fund the state government’s affordable housing initiatives.

Just how widespread is the second home mortgage tax deduction here in California?

The Franchise Tax Board stated about 4.2 million taxpayers, on average, claimed the mortgage interest deduction annually. Roughly 5 percent of California’s taxpayers, according to federal data and the Assembly’s most recent legislative analysis, use the deduction on a second home – which comes out to a little less than 200,000 taxpayers.

Those claiming a second home mortgage interest deduction generally experience a tax savings of $928, according to the Federal Tax Board and AB 71’s legislative analysis – or roughly $200 million in revenue not going into state coffers.

 

 

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One thought on “Taxes, Taxes, Oh Those Persistent Taxes: Second Home Levies (Again!)

  • December 23, 2017 at 9:38 am
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    Ca leaders absolutely love to enact new taxes. They simply cannot help themselves.

    Reply

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Standing Watch/Take Action

In this section you will find resources and supplemental information on what you can do to Take Action. Submit additional information or tips on this issue to editor@thelog.com

It might have been a quiet 2017 for AB 71, but who knows what happens in 2018? Would the proposal crash and burn? Perhaps it gains momentum and reaches the governor’s desk for signature? Does Washington, D.C.’s tax plan hamper or foster California’s efforts to alter its tax policy? Could 2018 be the year boaters lose the second home tax deductions at both the state and federal levels?

Reach out to the following legislators, policymakers and advocates to share your two cents on AB 71.

Recreational Boaters of California (RBOC)

Peter Robinson, 2017 President

916-441-4166

rboc@rboc.org

 

California Sportfishing League

Marko Mlikotin, Executive Director

916-936-1777

info@sportfishingconservation.org

 

Assembly member David Chiu

916-319-2017, 415-557-3013

assemblymember.david.chiu@assembly.ca.gov

Chief of Staff: judson.true@asm.ca.gov

Legislative Director: erin.baum@asm.ca.gov

Twitter: @DavidChiu

 

Assembly member Eduardo Garcia

760-347-2360, 760-355-8656, 916-319-2056

assemblymember.eduardo.garcia@assembly.ca.gov

Twitter: @AsmEGarciaAD56

 

Assembly member Autumn Burke

310-412-6400, 916-319-2062

assemblymember.burke@assembly.ca.gov

Twitter:@AsmAutumnBurke

 

State Sen. Kevin DeLeon

213-483-9300, 916-651-4024

senator.deleon@senate.ca.gov

Twitter: @kdeleon

 

State Sen. Ben Allen

310-318-6994, 916-651-4026

senator.allen@senate.ca.gov

Twitter: @BenAllenCA

 

State Sen. Patricia Bates

949-598-5950, 760-642-0809, 916-651-4036

senator.bates@senate.ca.gov

Twitter: @SenatorPatBates

 

State Sen. Hannah-Beth Jackson (Santa Barbara/Ventura)

805-965-0862, 805-988-1940

senator.jackson@senate.ca.gov

Twitter: @SenHannahBeth

 

State Sen. Toni Atkins (San Diego)

senator.atkins@senate.ca.gov

619-645-3133

Twitter: @ToniAtkins

 

Sen. Dianne Feinstein

202-224-3841

senator@feinstein.senate.gov

Twitter: @SenFeinstein

 

Sen. Kamala Harris

213-894-5000, 619-239-3884

Twitter: @KamalaHarris

 

Rep. Ted Lieu (Los Angeles)

323-651-1040, 202-225-3976, 310-321-7664

ted.lieu@mail.house.gov

Twitter: @TedLieu

 

Rep. Alan Lowenthal (Long Beach)

562-436-3828, 202-225-7924

alan.lowenthal@mail.house.gov

Twitter: @RepLowenthall

 

Rep. Scott Peters (San Diego)

858-455-5550, 202-225-0508

scott.peters@mail.house.gov

Twitter: @RepScottPeters

 

Rep. Juan Vargas (San Diego)

619-422-5963, 202-225-8045

juan.vargas@mail.house.gov

Twitter: @RepJuanVargas

 

Rep. Darrell Issa (Oceanside/Dana Point)

949-281-2449, 760-599-5000, 202-225-3906

darrell.issa@mail.house.gov

Twitter: @DarrellIssa

 

Rep. Dana Rohrbacher (Newport Beach/Huntington Beach)

714-960-6483, 202-225-2415

dana.rohrbacher@mail.house.gov

Twitter: @DanaRohrbacher

 

Rep. Julia Brownley (Channel Islands/Ventura)

805-379-1779, 202-225-5811

julia.brownley@mail.house.gov

Twitter: @JuliaBrownley26