Are HOA Fees Tax Deductible?

Posted May 22, 2024


If you’re looking at properties, you may notice some houses and condos for sale have HOA fees in their listings. You might be wondering if HOA fees are mandatory, how often they need to be paid, what the fees cover, and if you can deduct HOA fees from your taxes. HOA payments are an added cost to consider when making your monthly housing budget.

What is an HOA Fee?

A homeowner’s association fee, or HOA fee, is collected from all property owners in the community by the property management company. The fee may be paid monthly or quarterly.

HOA fees pay for basic maintenance, property improvements, and cover the costs of common areas like parking, roofing, and landscaping. The fees also cover other amenities such as community clubhouses or pools. HOA fees vary between properties and are determined by maintenance costs and property values.

How to Know if a Property Has HOA Fees

HOA fees are common in condominiums and townhouses, but single-family homes in neighborhoods can also have HOA fees. A realtor can help you check if a property you’re interested in has a required HOA fee listed.

Before you purchase a property, it’s important to know what fees you will be responsible for paying monthly or annually. HOA fees can increase in price over time and may not cover every repair cost for your unit. Make sure you and your realtor research and understand the terms of any HOA agreement.

Are HOA Fees Deductible?

In general, you cannot deduct HOA fees from your taxes if the property is your primary residence. However, there are a few exceptions.

If you are self-employed and work primarily in your home, you can deduct a part of your HOA fee through your home office deductions. The amount deducted corresponds with the size of your home office. For example, if you use 15% of your home as an office, you can deduct 15% of your HOA fees.

The second exception is if you own and rent out your property. You can deduct all your HOA fees from your taxes. In this case, the IRS considers the HOA fees a part of your rental property expenses.

You are also allowed to deduct part of your HOA fees from a secondary residence, including any residence you live in for part of the year, and rent out for the remainder. You are allowed to deduct part of your yearly fee based on how much of the year you occupy the home. For example, if you rent out the property six months of the year, you can deduct six months’ worth of HOA fees from your tax return.

If you qualify to deduct HOA fees, you will need to report them in a Schedule E form. The IRS lets you deduct up to $25,000 of HOA fees from rental properties each year.

Before You Buy

You need to be aware of all the added expenses involved in owning a property before you decide to buy. HOA fees can cost hundreds of dollars per month on top of your mortgage, pushing your budget to the limit if you aren’t prepared for the additional expense.

Ensure you ask what amenities and services the HOA fees cover and what you’ll still be responsible for as a homeowner before entering into a purchase agreement.

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.

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