While HOAs are nonprofit organizations, the IRS regards them as a corporation. In any case, HOAs collect various fees from homeowners to cover repair and maintenance costs. For this reason, HOAs must file tax returns annually on these dues. The good news is that some HOA fees might be eligible for tax deductions, lowering your tax bill. So, are HOA fees tax deductible? Let’s find out.
Are HOA Dues Tax Deductible?
As you already know, HOAs are professional organizations composed of board members, thus considered a business. Since they collect dues from residents, they must file taxes as any other company would.
Given that HOAs are nonprofit organizations, tax deductions will depend on whether you use your property as your primary residence or for rental and commercial purposes.
Are HOA Fees Deductible for Rental Properties?
HOA fees do not have tax exemptions. However, you can write off HOA dues from your tax returns if you use your home as an investment property. Rental income is tax deductible. You can also deduct maintenance costs and operating expenses from your taxable HOA fees. The whole amount can be deductible if you rent the property for an entire year.
Are Homeowners Association Fees Tax Deductible for Commercial Properties?
If you work from home, you might wonder whether HOA fees are tax deductible on commercial property. Well, whether you use your home as an office or business premises, your HOA fees might qualify for tax deductions. The taxable amount depends on how much space you use for commercial purposes. For instance, if 30% of the home is your office, 30% of your HOA fees qualify for tax deductions.
Are HOA Special Assessments Tax Deductible?
HOA special assessments are one-time fees imposed on HOA homeowners to cover unexpected repair and maintenance costs. Like HOA dues, special assessments are not tax deductible. You can only write off special assessments for properties used as rentals and commercial premises if the assessment is for repairs and maintenance.
Learn More About Tax Deductions on HOA Fees
Abel Accountants can assist you with your HOA tax return in Sandy Springs. Our qualified team of certified accountants is here to guide you on tax-related issues. We will help you determine what HOA fees qualify for tax deductions to lower your tax bill for maximum savings. Contact us today for specialized tax preparation services for your HOA community.