Orange County California Home Buyers Ask “How Much Is Mello Roos Tax”?

Orange County California Home Buyers Ask “How Much Is Mello Roos Tax”?

I hear this all the time from Orange County Home Buyers. They want to know what percentage is the total property tax including Mello Roos Tax.

Mello Roos Tax is NOT a percentage tax it’s a flat tax.

This is the most commonly misunderstood tax for Orange County Home Buyers. Some of this is the fault of listing agents who either don’t understand the tax themselves, or are trying to minimize it to potential Orange County Home Buyers….I often see listings with Mello Roos included as a percentage tax. Such as:

“Total tax rate is 1.4%”

This a complete fallacy. 1.4% of what? In Orange County, our property tax begins at 1% of assessed value. Normally this is the most recent sale of the property. Mello Roos tax (if any) is then added to that number as a flat rate.

Whatever the previous owner paid in Mello Roos tax is what the new owner will pay.

For example:

A seller paid $500,000 for a home and Mello Roos is $1000/year. They paid a total tax of $6000/year (1% of $500K + $1000 for Mello Roos).

Now a new buyer pays $800,000 for that home (yes, very optimistic, I know ). Mello Roos is still only $1000/year. The new buyer will now pay $9000/year in tax. (1% of $800K + $1000 for Mello Roos)

The listing agent who includes Mello Roos tax as a percentage is not representing the tax situation correctly. 1.4% of what? the old assessed value? the list price? of what.

Fortunately for Orange County Home Buyers it’s very easy to determine exactly what your property tax will be. Your real estate agent has this information at the click of a button….well, maybe 2 buttons.

Mello Roos varies from city to city and even from tract to tract. So each property is unique. Don’t assume that the home around the corner will be the same as the one you are in. But the good news is your Orange County Buyer Agent can help you with this so you have all the information you need to make an informed decision.