Are HOA Fees Tax Deductible?
During tax season, many homeowners look to take advantage of any deductions they may claim to help reduce their tax bill. Unfortunately, the complex nature of the tax system makes it easy to miss legal deductions. Homeowners in an HOA may wonder what sort of deductions are allowable when it comes to the HOA fees they are required to pay.
Monthly HOA Dues
What HOA fees cover will vary by association, but they typically provide services such as landscaping, building maintenance, utility services, and the upkeep of common amenities including pools, clubhouses, and gyms. Generally, these fees are not tax deductible. While this is disappointing to HOA members, the good news is that, in certain circumstances, a portion of monthly dues may be deducted. To find out if any portion of your monthly dues are deductible, it is always best to seek the advice of a certified tax professional.
Working from Home
If you work from home and meet the Internal Revenue Service’s definition of a home office, you are entitled to write off a portion of your home’s expenses if they correspond with your home office’s share to the total area of your home. So, if your home office uses 10 percent of your home, you are allowed to write off 10 percent of your home expenses, including 10 percent of your total HOA dues payment. It’s important to note that, as of 2018, the Tax Cuts and Jobs Acts only allows a home office deduction if you are self-employed.
If you rent your property out, your HOA fees are 100 percent deductible as a rental expense, with the exception of any portion that was used as a special assessment for improvements. If you rent your home out for only a few months each year, you may be able to deduct a portion of your fees equal to the length of time the property was rented.
Because investment properties are different from residences, you are allowed to write off all operating expenses incurred by ownership. In general, this means that you can write off 100 percent of any fees to which your investment property is subject, including monthly HOA fees.
Taxes can be tricky and overwhelming, but it is reassuring to know that there are options when it comes to HOA fees. Talk with your trusted tax professional to ensure that you take advantage of all possible deductions and benefits. For more helpful tips on HOA communities, be sure to visit our blog and for help managing your HOA community, contact Spectrum Association Management today!