Are Condominium Association Fees Tax Deductible?
Condominiums are a "double-edged" sword of sorts. On the one hand, they are a hybrid offering the benefits of real estate ownership, with some of the ease of renting, since many maintenance tasks are handled by people hired by the condo association. On the other hand, these benefits can mean higher costs through condo dues and lower tax shelters because of the dues' limited deductibility.
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Components of a Condo Fee
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Although condominium association fees, also referred to as HOA for homeowner's association fees, vary from development to development, they typically contain, at a minimum, the condo owner's prorata share of the cost of operating and maintaining the complex's common features. While some associations provide services like cable TV or maintenance of a common theater and pool, other associations perform fewer services and set their dues to cover the bare-minimum maintenance costs of the shared parts of a condominium, like its parking lot or surrounding ground.
Deductible Components of the Fee
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A good "rule of thumb" is that if you could not deduct an expense you paid for from your taxes, then you are unable to deduct part of your condo owner's fee. Since most condo owner's fees are for services or repairs, they are not deductible. It is possible, though, that your condo association pays property tax on the common areas of the development. In that rare case, the portion of your condo fee that goes towards the property tax could be deductible.
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Assessments
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One source of confusion is assessments. When a city assesses a property tax, that tax is deductible, unless the assessment is only for the benefit of your property. On the other hand, when a condominium owner's association places an assessment on your property for repairs or improvements, that cost is not deductible. A city or county assessment is a tax, but a condo assessment is just a day-to-day cost of owning a condo unit.
Condos Held for Investment Purposes
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The exception to the "nondeductible rule" is if you hold a condo as an investment, such as a rental. In this case, you could take all the condo dues as expenses. To do this, simply report the total annual dues as an "other expense" on line 18 of your Schedule E form.
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References
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