You might notice HOA fees listed on some condos and houses for sale when looking at properties. HOA fees can be mandatory. You may be curious about how often they must be paid, the cost of the fees, and whether you can deduct HOA fees. When calculating your monthly housing budget, HOA fees should be considered.
What’s an HOA Fee?
The property management company collects a homeowner’s association fee (or HOA fee) from all community owners. This fee can be either a monthly or quarterly one.
HOA fees cover basic maintenance and property improvements. They also cover common areas such as parking, roofing, landscaping, and other costs. The fees also cover other amenities like community clubs or pools. HOA fees can vary from one property to another and are determined by the property’s value and maintenance costs.
How to Find Out if a Property Pays HOA Fees
HOA fees are not uncommon in condos or townhouses. However, neighborhood single-family homes may also be subject to HOA fees. You can ask a realtor to check if the HOA fees are required for the property you are interested in.
It is important to understand the fees you will have to pay monthly or annually before buying a property. HOA fees may increase in cost over time and not cover all repair costs for your unit. You and your realtor should thoroughly research the terms of any HOA agreement.
Are HOA fees deductible?
If the property is your primary residence, HOA fees cannot be deducted from taxes. There are some exceptions to this rule.
If you are self-employed, you can deduct part of your HOA fees through your home office deductions. The size of your home office determines the amount you can deduct. Using 15% of the home for office purposes can deduct 15% from your HOA fees.
If you rent your property out, the second exception is for owners. All HOA fees can be deducted from your taxes. The IRS will consider the HOA fees part of your rental property expenses in this instance.
A portion of your HOA fees can be deducted from a secondary residence. This includes any residences you reside in for the entire year. The remainder of the amount can be rented out. You can deduct a portion of your annual fee based on the length of time you have lived in the home. If you rent the property for six months, you can deduct six months’ worth of HOA fees from your tax return.
You can deduct HOA fees if you are eligible. To do this, you must file a Schedule E form. According to the IRS, you can deduct HOA fees from rental properties up to $25,000 each year.
Before you Buy
Before buying a property, it is important to understand the additional costs involved. If you don’t have the budget for this additional expense, HOA fees could cost hundreds of dollars each month in addition to your mortgage.
Before signing a purchase agreement, ensure you know what HOA fees cover.