Tax season is well upon us now, and if you haven’t already prepared your individual return, you surely will do so soon! As so many of us are considering the state of our finances, and the many possibilities for tax deductions, some of us might wonder how our HOA assessments figure into our personal tax returns. If you’re a volunteer on the HOA board, you’re likely to get some questions from your residents about what they can and cannot deduct on their taxes—and it’s important that you know what to tell them!
- First and foremost, the question you’re sure to be asked is whether HOA dues are tax deductible. The IRS provides for a good many ways in which home ownership can offer tax benefits, and homeowners can certainly deduct their mortgage interest and real estate taxes, as well as other itemized deductions. However, HOA dues are not on the list of approved deductions.
- With that said, the story is a little different for renters. Any individual who rents a property can deduct their HOA assessment as a necessary expense in maintaining the rental property. This is done on the Schedule E form, and while there is no line denoting HOA fees, you can list it under rental property maintenance.
- Remember, however, that if you derive personal use from a rental property for only a portion of the year, you can only deduct HOA assessments from the proportion of time in which you are actually using the property. So if you pay HOA dues for a summer vacation home, for example, you will need to do a little division to determine how many months’ worth of HOA dues you can actually deduct.
The bottom line for the taxpayer is that the IRS does offer some ways to deduct the expenses of using and maintaining a rental property, and homeowners receive similar tax breaks in a number of ways, but HOA dues are generally not going to be a big deduction. Keep your residents informed so that they don’t find themselves seeking to deduct something that’s really not supposed to be deducted!