Tax deduction for HOA Special Assessment ?

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Mardoc01
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Tax deduction for HOA Special Assessment ?

Post by Mardoc01 »

I fear I may already know the answer but if you have a special assessment imposed by a condominium building that’s for various different common area things including upgrade hallways and new roof Over/above your normal monthly HOA fees. is that deductible at all for me?
stan1
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Re: Tax deduction for HOA Special Assessment ?

Post by stan1 »

Nice try, but no.

If you were a landlord renting it out that's a different matter.
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Mardoc01
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Re: Tax deduction for HOA Special Assessment ?

Post by Mardoc01 »

Bummer. They just stick it to us.
Dottie57
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Re: Tax deduction for HOA Special Assessment ?

Post by Dottie57 »

The HOA is simply doing maintenance to keep property values up. Similar to a single family house owner can’t deduct the same.

The alternative to special assessments is higher monthly fees where more money goes into a reserve fund. So the association has to pick their poison.
stan1
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Re: Tax deduction for HOA Special Assessment ?

Post by stan1 »

Mardoc01 wrote: Wed Jun 16, 2021 12:15 pm Bummer. They just stick it to us.
Not really, it means you or the previous owner benefited from lower monthly HOA assessments in the past.
adamthesmythe
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Re: Tax deduction for HOA Special Assessment ?

Post by adamthesmythe »

stan1 wrote: Wed Jun 16, 2021 12:25 pm
Mardoc01 wrote: Wed Jun 16, 2021 12:15 pm Bummer. They just stick it to us.
Not really, it means you or the previous owner benefited from lower monthly HOA assessments in the past.
Besides, "us" is all the people who vote (or don't vote) for the volunteer board members who arrange to maintain "your" property.

The best way to avoid unexpected costs of ownership is to rent.
jebmke
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Re: Tax deduction for HOA Special Assessment ?

Post by jebmke »

adamthesmythe wrote: Wed Jun 16, 2021 1:07 pm The best way to avoid unexpected costs of ownership is to rent.
Or, if purchasing a condo, carefully scrutinizing the association balance sheet to ensure that adequate reserves exist. Not a guarantee but can eliminate many surprises.
When you discover that you are riding a dead horse, the best strategy is to dismount.
stan1
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Re: Tax deduction for HOA Special Assessment ?

Post by stan1 »

One can also volunteer to serve on the HOA board of directors if you want more visibility into the decisions being made.
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LilyFleur
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Re: Tax deduction for HOA Special Assessment ?

Post by LilyFleur »

My condo association had a $25,000 special assessment this year.

On my building alone, they are working for several months, getting rid of balcony railings that were crumbling with dry rot and termite damage, opening exterior walls to update internet wiring, re-roofing, re-painting, and a whole lot more. This is the first new roof since the original roof in 1975.

This is the only special assessment that we've had in the ten years I've lived here. A complete re-piping was paid for several years ago with our HOAs (the cost for that was $10,000 per unit).

When I lived in my aging 2,000 square foot home, there were easily $25,000 in repairs for each ten years. And now, in my condo, I don't have to take the bids nor supervise the work. I thank the board every chance I get--they spend tons of volunteer hours to keep up the property.

It's not perfect, but it works for me.
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Kenkat
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Re: Tax deduction for HOA Special Assessment ?

Post by Kenkat »

The special assessment may be eligible to add in to your cost basis on the property which could come into play if you exceed the capital gains exclusion amount for your primary residence.
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Mardoc01
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Re: Tax deduction for HOA Special Assessment ?

Post by Mardoc01 »

Kenkat wrote: Wed Jun 16, 2021 1:35 pm The special assessment may be eligible to add in to your cost basis on the property which could come into play if you exceed the capital gains exclusion amount for your primary residence.
This is the question I have. I can add the special assessment to the cost basis ???
Jack FFR1846
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Re: Tax deduction for HOA Special Assessment ?

Post by Jack FFR1846 »

Mardoc01 wrote: Wed Jun 16, 2021 1:38 pm
Kenkat wrote: Wed Jun 16, 2021 1:35 pm The special assessment may be eligible to add in to your cost basis on the property which could come into play if you exceed the capital gains exclusion amount for your primary residence.
This is the question I have. I can add the special assessment to the cost basis ???
I wouldn't think so if it's replacing a roof and such, which is normal upkeep. If they were building a new balcony outside each unit, sure. Painting normal areas...nope.
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Elric
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Re: Tax deduction for HOA Special Assessment ?

Post by Elric »

Out of luck on tax deductions, but I would ask some questions. Does the association have a reserve study? If so, what does it say?
  • Was the need for a special assessment anticipated in the study? If so, well, then owners had due notice.
  • If it said reserves were adequate and no need for a large special assessment was anticipated, a fair question to the board is what happened that resulted in this unexpected or unplanned need?
  • If the board says "what's a reserve study?" then it's time for a new board.
"the remedy to be applied is more speech, not enforced silence." Supreme Court Justice Louis Brandeis
adamthesmythe
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Re: Tax deduction for HOA Special Assessment ?

Post by adamthesmythe »

Mardoc01 wrote: Wed Jun 16, 2021 1:38 pm
Kenkat wrote: Wed Jun 16, 2021 1:35 pm The special assessment may be eligible to add in to your cost basis on the property which could come into play if you exceed the capital gains exclusion amount for your primary residence.
This is the question I have. I can add the special assessment to the cost basis ???
On a house, maintenance cannot be added to the cost basis but improvements can be. I expect it is the same for a condo.

Keep receipts and documentation, and spend money to get a definitive answer only if bumping up against the 250/500 limit.
stan1
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Re: Tax deduction for HOA Special Assessment ?

Post by stan1 »

adamthesmythe wrote: Wed Jun 16, 2021 2:42 pm
Mardoc01 wrote: Wed Jun 16, 2021 1:38 pm
Kenkat wrote: Wed Jun 16, 2021 1:35 pm The special assessment may be eligible to add in to your cost basis on the property which could come into play if you exceed the capital gains exclusion amount for your primary residence.
This is the question I have. I can add the special assessment to the cost basis ???
On a house, maintenance cannot be added to the cost basis but improvements can be. I expect it is the same for a condo.

Keep receipts and documentation, and spend money to get a definitive answer only if bumping up against the 250/500 limit.
The IRS has very specific guidance on what can be included in basis and what cannot. I'd be asking the HOA to provide itemization so I could split up what adds to basis and what does not. I'd want the data and would make my own decision.

https://www.irs.gov/publications/p523
humblecoder
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Re: Tax deduction for HOA Special Assessment ?

Post by humblecoder »

Mardoc01 wrote: Wed Jun 16, 2021 1:38 pm
Kenkat wrote: Wed Jun 16, 2021 1:35 pm The special assessment may be eligible to add in to your cost basis on the property which could come into play if you exceed the capital gains exclusion amount for your primary residence.
This is the question I have. I can add the special assessment to the cost basis ???
https://www.nolo.com/legal-encyclopedia ... -home.html

If you own a condominium and your homeowner's association imposes special assessments to pay for capital improvements to the common areas such as a new roof or new swimming pool, you get no deduction but you may add the amount to your condo's tax basis.

I am not a lawyer, accountant, or tax professional. I am just a dude who knows how to do a google search.
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Kenkat
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Re: Tax deduction for HOA Special Assessment ?

Post by Kenkat »

Yes, I think you will need to ascertain what is considered maintenance / upkeep (not added to cost basis) and what is considered an improvement (and can be added). New roof is probably maintenance. Updated hallways could be an improvement if they went from carpet to hardwood, tile, etc. or added additional lighting, millwork, etc. If it’s just repainting and new carpet, then probably not.
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Elric
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Re: Tax deduction for HOA Special Assessment ?

Post by Elric »

Kenkat wrote: Wed Jun 16, 2021 4:41 pm New roof is probably maintenance. Updated hallways could be an improvement if they went from carpet to hardwood, tile, etc. or added additional lighting, millwork, etc. If it’s just repainting and new carpet, then probably not.
I don't know how it works for common areas as in a condo, bit the IRS specifically uses an entire roof replacement as an example of what adds to a home's basis.
"the remedy to be applied is more speech, not enforced silence." Supreme Court Justice Louis Brandeis
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Kenkat
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Re: Tax deduction for HOA Special Assessment ?

Post by Kenkat »

Elric wrote: Wed Jun 16, 2021 5:29 pm
Kenkat wrote: Wed Jun 16, 2021 4:41 pm New roof is probably maintenance. Updated hallways could be an improvement if they went from carpet to hardwood, tile, etc. or added additional lighting, millwork, etc. If it’s just repainting and new carpet, then probably not.
I don't know how it works for common areas as in a condo, bit the IRS specifically uses an entire roof replacement as an example of what adds to a home's basis.
Interesting, you are correct - the list linked by stan1 includes more items than I would have thought - it looks like replacement of “major” items like doors, windows, roof, etc. do add to your cost basis.
IMO
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Re: Tax deduction for HOA Special Assessment ?

Post by IMO »

I do think it is a tax deduction.

It wouldn't factor in until your sold the property and were determining capital gains. Seems to me that the items would be long term improvements to the property, for which you are paying a part of that improvement which is essentially an inherent part of your ownership of the condo (you as an owner are not allowed to divest yourself of the common areas).

I don't know if there has/hasn't been any tax cases on this topic? Seems like best to keep records of this if you ever sell the property and consult with a tax advisor.
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