Is Mello Roos deductible?
“We’d like a newer home and we’ve been looking in north county and Carmel Valley. Many of them have those Mello-Roos payments. Is Mello-Roos tax deductible?”
***ANSWER:
If you’re not familiar, Mello-Roos is a fee LIKE an extra property tax. You’ll find it on a lot of local homes built after around 1990.
A tax expert told me Mello-Roos is NOT deductible…but he felt many professional tax-preparers deduct it anyway. He said deductible taxes must be for “general public welfare” and not “local benefits” (e.g. streets, sidewalks, irrigation) only for a group of properties, even if it provides “incidental benefit to the public welfare”. The latter describes Mello-Roos.
Interestingly, since Mello-Roos payments are on your county TAX bill and paid to the TAX assessor, he thought an IRS auditor could be persuaded to allow the deduction.
Another tax expert felt at least the interest portion of the Special Tax is deductible (49.24% of the Special Tax for Fiscal Year 2001/02), but the entire payment may or may not be deductible.
Opinions are mixed, so consult with your tax professional!
