Are Homeowner Association Dues Deductible?

In general, there is no Schedule A deduction for homeowner association (HOA) dues.  Whether any part of HOA dues can be a deductible expense depends on how the residence is being used. There are circumstances where HOA dues may be wholly or partially deductible or even add to the residence’s basis, as explained below.

Rental – Where the residence is being used as a rental, the homeowner dues are deductible on Schedule E.  Where the rental is a vacation home rental, the appropriate proration is required.

Office In Home – Where the owner resides in the home and a portion of the home qualifies for the business use of the home, and provided the simplified deduction method for computing the office-in-home deduction is NOT used, a prorated portion of the HOA dues can be used in the home office deduction computation.  

Taxes (Schedule A) – Where the HOA fee is itemized and a portion of the fee includes common area real estate taxes, the tax portion can be deducted as real property taxes on Schedule A.

Interest (Schedule A) – Although very rare and probably involving a minimal dollar amount, where the HOA fee is itemized and a portion of the fee includes interest secured by the association’s real property, the interest may qualify for the home mortgage interest. Caution – Since this interest is not reported on a Form 1098 it will create a mismatch on the IRS computer and should be reported on line 11 – “Home mortgage interest not reported to you on Form 1098”. 

Additions to Basis - If the HOA assesses the owners for an improvement (for example adding a swimming pool), the amount each HOA member pays of that cost can be added to the basis of their home.

 

 

May 10, 2017 by Lee Reams Sr.
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