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Do HOAs and Condo Associations Pay Taxes?

Posted on Fri, Feb 13, 2009 @ 05:35 AM

An important aspect of HOA finances is tax liability. Generally, HOAs are exempt from state and federal income taxes if:

  • Most of its HOA units are used by individuals as residences
  • It's organized and operated to buy, build, manage, maintain, and care for HOA property
  • At least 60% of its gross income for the taxable year comes from HOA membership dues, fees, or assessments
  • None of the HOA's net earnings or income goes to any individual, except if it's by a rebate of excess membership dues, fees, or assessments, for example

State and federal law require the HOAs and Condo Assocations to make an election to be treated as a tax-exempt organization. Also, even if the HOA is tax exempt, it must file a federal tax return.

The tax exemption excludes from the HOA's gross income all of the membership dues, fees, or assessments collected by the HOA. In addition, the HOA gets an automatic $100 deduction on its gross income. Essentially, then, a tax-exempt HOA is taxed only on its investment income, if it has any, and any other income it might have, such as from renting out a recreational facility to non-member/owners, less the $100 deduction.

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Should money received from a bank loan to a Condominium Association be included in the Condominium's current year gross income for income tax purposes?

posted @ Sunday, July 19, 2009 7:32 PM by William C. Skutt

Are monies received from a bank loan in the current year included in gross income on the current year's income tax return (form 1120-H)?

posted @ Monday, July 27, 2009 3:50 PM by Bill Skutt

Our condo association is only 2 yrs old. I was just elected president for the 2010 year and have to file our taxes for 2009. The previous president said that all she did for the 2008 tax year is copy the 2007 tax form completed by the developer for the previous year. I know this can't be right. In addition to the tax form, is there a document from the govt or from our bank account that I should reference in completing the form? Or is it just looking at our Dec. 2009 bank statement? We are a 6-unit condo, self-managed. All of our assessments are used to pay standard costs - garbage pick up, snow removal, etc.

posted @ Friday, February 12, 2010 10:33 AM by Barbara Bouie-Scott

Our homeowners association has been in existence since early 1990 and has not filed a return. I would like to file the returns for all the years that I can find the information for. Is that advisable or should we just file for the last 10 years or something in line with the statute of limitations for the returns

posted @ Tuesday, February 01, 2011 7:37 PM by HOA HOA

We, too, are a small HOA and qualify for tax Exempt status as a Non-Profit. I heard that Non-Profits now must file a form with the IRS. We hadn't previously since I was told we wouldn't need to. Do we only need to file the one form to register us with the IRS?  

posted @ Monday, February 14, 2011 5:10 PM by Susan

Being new to the blog area, can someone please tell me where I can post a condo related question? Is there a specific website?

posted @ Tuesday, April 05, 2011 7:49 AM by D Bares

In 2010, my condo HOA contracted to have new roofs installed on each building. Based on paying HOA fees (reserves), can the board prorate the cost of materials/supplies, divide it by the number of units, and each unit can deduct the expense as a capital improvment on their tax return?

posted @ Monday, April 11, 2011 12:31 PM by Alfred

I am in Illinois, and when a new board took, that was one the concerns they had; one the the board members called and wrote to the IRS and gave them a few facts about our concerns; we were told we do not have to file taxes as we do not have any one working for us, 60% of our assessments go to taking care of out association, we do meet requirements for exemptions.

posted @ Saturday, April 16, 2011 7:35 PM by sofia

If our association received a sizable check from BP due to a claim we submitted for lost income the association incurred from reduced parking fees...is this considered to be taxable income? We are located in Orange Beach, Alabama

posted @ Saturday, May 07, 2011 11:11 AM by gordon smith

If a Condominium Association in Florida forecloses on a condo unit and buys it back and rents it out, is the Association required to pay sales tax?

posted @ Thursday, July 14, 2011 1:02 PM by Sue


posted @ Wednesday, July 20, 2011 8:47 AM by CAROLYN

Should an incorporated 501-C(4)HOA have a tax exemption certificate to use when purchasing goods for the association?

posted @ Sunday, September 18, 2011 10:56 AM by pen

I recently purchased a condo in CA and became the HOA president only to find that the association has not been filing state and fed tax returns or the statement of common interest to the SOS office. The status of the corporation is suspended. The CC&R states it a non profit Corporation but I doubt anyone has filed for the state or fed tax exempt status. The association is under reserved and the property has been under maintained so the available reserves are already earmarked for maintenance. Has anyone else gone through the process of reviving a CA HOA corporation? What types of fines are there for not filing with the SOS. Are there minimum tax fees for CA state? What is the statute of limitations on state returns, 7 years like the fed?

posted @ Friday, September 30, 2011 10:39 AM by MMCHOA

Are there any penalties with the IRS if we charge reduced HOA fees for boardmembers compared to other home owners in the HOA? We are having difficulty getting people in our community to participate in the HOA board. One idea being circulated is reducing fees for households 1/2 for those that participate in the HOA board. Concerns have been raised that this would be considered "income" & we could get into trouble with the IRS. However, no money is being circulated as income. We are just reducing or waiving HOA fees for some households. 
I don't see any issue with it since our HOA is technically considered a corporation with the IRS & is only a "non-Profit" with the state. No one is technically getting a paycheck here.

posted @ Friday, September 21, 2012 5:39 PM by CAC

We are part of small wi condo association. Seven of the condos are owned by father and son. He takes care of the grounds etc. fees are 1k per year. He charges us 7k to take care of everything. So he and his father think it should be a wash and don't pay any dues. He gets no 1099. I don't think this right let alone legal. Any thoughts

posted @ Friday, April 12, 2013 10:29 AM by Gary Schlehuber

My question is can a co-op owner take out a individual Home Owners loan using their certificate? If so what are the stipulations?

posted @ Friday, May 17, 2013 1:17 PM by BarbraL

We submitted paperwork to apply for a SBA loan post-Sandy, but we’re told the revenue and expenses on our tax returns -- previously submitted by the developer, now deceased -- do not match the financials that his partner later put together for us before the transition of control (he said the developer left him very poor records). Our current management found an accountant willing to help us prepare and submit amended tax returns, based on the figures we currently have. Is this normal or acceptable? As a board officer, I have no interest in signing off on something that would prompt fraud investigation (especially for stuff someone did in the past, in which I was in no way involved). Or am I making too big a deal, since we don’t pay taxes anyway? Thanks!

posted @ Tuesday, July 09, 2013 1:19 PM by Dougal

Follow up to my earlier post. A referral from the CAI lead me to a CPA that specialized in small HOA revivals. We applied for a retroactive (to the incorporation date) tax exempt status from the state of California. In doing so we paid no penalties from not filing and were able to revive the corporation after 30 years of being suspended at a cost of normal filing fees for the year. It took some time working the the CA FTB to supply requested documents but the process was very straight forward. There are many reasons to be an active corporation. Filing for an SBA loan after a disaster is just one of them.

posted @ Wednesday, October 01, 2014 2:48 AM by MMCHOA

We have had a HOA since 2009. All of the homes are free standing without any connecting walls. They each have their own tax IDs as well. We only have the private road, sidewalks, and landscaping maintenance in the gross common elements that the HOA pays for. As each unit was sold with only a total of 4 now each owner paid a small payment of dues. We used the dues to pay for the HOA insurance, repairs and maintenance. No one is paid to manage the HOA and there are no employees. All of the dues collected are to pay the bills for insurance, repairs, and maintenance. Do we need to file taxes? Now because the HOA is so small they want to dissolve the HOA. But we have not ever filed taxes and the state of Washington wants "Revenue Clearance Certification" asking if taxes has been paid. What do we do?

posted @ Sunday, January 04, 2015 10:55 PM by Sue Green

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