Mello-Roos Special Tax Assessments Will Not Be an Allowed Tax Deduction in 2012

Many California taxpayers who have been using the total amount of their property tax bill as a deduction for state income tax purposes will have to discontinue this practice with their 2012 tax bill (taxes due April 2013). Although the law hasn't changed, the Franchise Tax Board's (FTB)software has been updated. I don't think most people really understood that special assessments and user fees including things such as vector control and water district charges were never suppose to be deducted. With a new computer system the FTB will be able to differentiate between these charges. Many of the smaller fees are rather insignificant and for many total less than $20. But the special assessments called Mello-Roos taxes are also no longer deductible, and that could make a big difference in a lot of state income tax payments. For many people in Orange County, the Mello-Roos component of their property tax bill can be close to 40%. Over 20% of the county's residents pay a Mello-Roos assessment and for the 2011-2012 tax year that amounted to about $207.8 million.