Mello Roos Is Not Tax Deductible – But That May Change

Have you been writing off your entire property tax bill?  Well, if you are a homeowner in Orange County, you are not alone by any stretch.  Those shopping for Orange County real estate are faced with the added tax burden of Mello Roos for most homes sold after 1986.  Mello Roos bonds were created to help the County fund public improvements and a variety of services that include everything from schools to infrastructure during the development of new areas.

Mello Roos has never been a legal tax deduction, however homeowners have routinely been jotting down ‘property taxes’ in a lump amount since the Mello Roos Act of 1982.   And until now, the Franchise Tax Board  has not pursued taxpayers for this, um, indiscretion.

Mello Roos Taxes Orange CountyFor the 2011 tax year, you’ll want to be mindful of a significant change when filing.  I’d suspect Governor Jerry Brown is looking for funds, and this is clearly an opportunity that has been missed over the last 30 years.  This year, a new computer system will be used to allow the Franchise Tax Board to distinguish between deductible, and non-deductible portions of your property tax bill.   Of course, you will have to consult with your CPA, but if you’re curious about what is generally considered tax deductible and what is not, the Franchise Tax Board has been kind enough to share a sample property tax bill and the breakdown.

But Their May Be Hope Yet…

Assemblymember Jim Silva (R – Huntington Beach) has introduced AB 1552 that would allow one to deduct their Mello Roos.  In his Press Release dated 1/26/12, he stated, “”The state is always looking for ways to capture more and more taxpayer money and this is a new low. By going after Mello-Roos fees, the state is actually taxing a tax. It is another way to go after Californians’ wallets and must be stopped.”   Jury is out just yet, and I’m not that optimistic that our financially challenged state will pass up the opportunity for potential income, but we’ll be watching out for it here.

If you have questions about Mello Roos in Orange County homes, don’t hesitate to reach out.  For tax advise, please reach out to your CPA.  My suspicion is that this won’t be the first time they’ve fielded this question.


  1. Thanks for taking the time to discuss this, I feel strongly about it.

  2. well, it needs to get some wheels as it is now they are losing this tax and with prices going up. It won’t last long without a fight

  3. Mary says:

    Thanks, my agent said it was. I think she just wants me to buy a house.

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