Mello-Roos Fees Not Tax-Deductible

Tax

As the deadline for filing income taxes draw near, here is something  to take note.   , in her column “Handling Hard Times” in the Orange County Register, posted this article on January 9, 2012, “State Targets Property-Tax Payers.”

As many as 5 million California property-tax payers who have been taking the entire amount they pay off their state income taxes could see a major cut in their deductions when they file next year.

Beginning with the 2012 tax bill (the one due in April 2013), the state Franchise Tax Board will require property owners to break down their property taxes into deductible and non-deductible portions.

That means property owners who have been deducting their Mello-Roos fees — often running into thousands of dollars — will no longer be able to deduct those or any other special assessments like vector control or mosquito abatement.

In Orange County, 181,550 of the county’s approximately 900,000 parcels were subject to Mello-Roos in the 2011-2012 tax year, according to the auditor-controller’s office.  They were billed a total of $207.8 million.

The difference between deductible and non-deductible property taxes is not a new rule. Mello-Roos fees, which pay for roads, schools, fire stations and other public facilities in new developments, have not been deductible from state income taxes since the legislature authorized the special assessments 30 years ago.

Many property owners, however, routinely deduct the entire amount of their property tax bill from their state income taxes instead of only the parts that legally are deductible. Others just use the amount on the Form 1098 that their mortgage holder paid to the county tax collector on their behalf.

Until now the Franchise Tax Board didn’t to go after them. A new computer system being installed this year, however, will allow the agency to distinguish the portions of property tax bills that are deductible and non-deductible, said Daniel Tahara, a FTB spokesman.

Click here for the complete story.

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About lilynyland

Former Realtor at Coldwell Banker George Realty in Alhambra, California. Graduate Realtor Institute (GRI), Accredited Distress Property Specialist (ADPS), Short Sale & Foreclosure Resource (SFR).
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2 Responses to Mello-Roos Fees Not Tax-Deductible

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

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  2. GREAT REVIEW! I pretty much agree with all your thoughts you said in your post, especially at the end of your article. Thank you, your post is very valuable as always. Keep up the good work! You’ve got +1 more reader of your super blog.

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