Is HOA Tax Deductible? What You Need To Know
Being a part of an HOA (homeowners association) is an inevitability for many. There are benefits and drawbacks to them, and there are pros and cons to the various fees that are associated with them. If you’re not familiar, understanding how those fees work can involve some questions. One of them happens to be: Is HOA tax deductible? We will answer that question here, as well as go over some frequently asked questions related to HOAs and their fees.
As one of the more prominent property management companies in Boston, we have had our fair share of HOA-related questions. There can be a lot of misconceptions. One of the first things renters want to clarify is what are the HOA fees, what it includes, and what ramifications they have with their taxes. So let’s get into these questions and clear the air.
Table of Contents
- What Are HOA Fees and Who Pays Them?
- Are HOA Fees Tax Deductible?
- FAQs
- Managing HOA with a Property Management Company
What Are HOA Fees and Who Pays Them?
Being part of an HOA can result in a lot of follow-up questions. When you are part of an HOA, that means paying fees that contribute to the community you are in. HOA fees are what residents pay for the use of the building or community’s amenities.
This sometimes – but not always – includes building staff, yard and landscape management, pools or gyms, or a professional management company that oversees various parts of the property. It can add up. Many of these amenities can be quite expensive, so building in fees to cover ongoing costs of things like pool maintenance and landscaping can be considered reasonable.
The homeowner is responsible for paying HOA fees. It is possible for a homeowner to pass on that fee to tenants in the case of a rental property. The important thing is that it is clarified in the lease and there is transparency in regards to HOA fees. As many people discuss in online forums, there is no standard way of dealing with HOA fees with rentals. Some landlords choose to absorb that cost while others pass it along to tenants by building it into the rental asking price.
Are HOA Fees Tax Deductible?
If you are paying HOA fees, many people ask: is HOA tax deductible? The short answer is, if it is your primary residence, it is not tax deductible. However, if you are using it as rental property, it is considered tax deductible as a rental expense. But here is what H&R block clarifies:
However, you might not be able to deduct an HOA fee that covers a special assessment for improvements. If the HOA fee is assessed for an improvement, you may be able to recoup your share of the cost of the improvement by taking a depreciation.
If you are using the property as your primary residence and you are required to pay HOA fees either monthly, quarterly, or yearly, you generally cannot deduct them from your taxes. But H&R Block goes on to clarify:
If you use the rental property for personal use for a portion of the year, then you can only deduct a portion of HOA fees from your tax return.
Owning property – especially managing rental property – comes with a lot of consequences and things to consider when doing your taxes. Your HOA is just one piece of the puzzle. You can read more about tax deductions specifically in Massachusetts, where whether you reside in a home or are renting is often a factor in reference to taxes and deductions.
FAQs for Your HOA
When entering into a homeowner’s association, you may have a lot of questions – especially from the perspective of an owner, landlord, or investor. While you might be wondering is HOA tax deductible, that might result in a number of other fee-related questions. So where do you get answers? Generally, from the HOA themselves. But it’s helpful to know what to ask.
Here is a list of questions you might want to address with your HOA:
- How much do HOAs fees cost, and is it paid monthly or yearly? This is the first question, but make sure it is clear to you so that you know going forward.
- What amenities and services do fees include? This can vary a lot from one location to the next. While the fees may be more in one place, that might be because there are a number of great amenities that are included.
- What does the HOA’s budget look like for the upcoming year? Ask what kinds of things are on the horizon in that neighborhood. You could foresee HOA fees going up, for example, if there are amenities being added.
- What are typical topics of discussion at meetings? Getting a general feel for the community and how the HOA operates would be helpful.
- What are the pet policies? If pets are important to you, asking the details on pets in that community is crucial.
- Can I lease out my residence? If you are entering into the property as a rental investment, make sure you know the policies.
- Are there restrictions on landscaping, outdoor decor and lighting, plants, yard waste, etc.? Before you move in, you should ask these questions so there isn’t anything you truly care about that is restricted.
Managing Rentals with a Property Management Company
Addressing HOA-related matters is a central part of being a homeowner, as well as a property manager and real estate investor. Hiring property managers in Boston is often a great idea for managing all kinds of HOA dilemmas that come up. Why not us?
If you’re looking for help managing your Boston area rental investment, look no further than Bay Property Management Group. Our dedicated professionals and in-house accounting team can help you with all your rental needs, including being prepared for tax time. Whether it’s managing tenant requests, coordinating maintenance, preparing marketing, managing vendors, or ensuring HOA compliance – we’ve got it covered! Contact BMG today to learn more about our property management services!