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HOA Special Assessments deductible?

Forum|Forum|6 years ago
June 6, 2019
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Our Homeowners Association billed a Special Assessment to stabilize land on community property that benefited the entire community. It was $1800.00 per household. Is this deductible?

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Best answer by Opus 17

No, it adds to your cost basis, which may affect your capital gains calculation when you sell.

O

Opus 17Answer

Employee

No, it adds to your cost basis, which may affect your capital gains calculation when you sell.

B

betsey_white

Where do you include this information in the return?

V

Vanessa A

Yes and no. You would total up the HOA fees but not tax assessments. You would then add this to the cost basis of your home which will decrease your profit in turn it will also decrease your capital gains.

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L

Laraness

Good day. My siblings and I inherited my mother's home, along with a slough of unpaid HOA fees. After a year of probate, we sold the house; and based on the FMV at the time of my mother's death, we sold with capital gains (even after figuring improvement costs, legal fees, etc necessary to sell). In order to sell, we had to settle the accumulated HOA fees (including late fees) and property taxes. As far as I can tell, the property taxes we paid are deductible; but is our payment of the HOA fees deductible or can it be used to increase the cost basis? (Note: we did not live in the house, but did not rent it either, and we owned it less than two years). Many thanks.

Carl11_2

Employee

If the home was not used for business purposes (i.e.; rented out) during the time the HOA fees accumulated, they are not deductible at all, and are not reported anywhere on the tax return.

As for capital gains, if the estate sold the property, then the sale would qualify for the "lived in 2 of last five years it was owned by the resident" capital gains tax exclusion.

If the property was transferred to the named beneficiary, then the named beneficiary gets a step-up in basis. The only taxable gain would be any profit made over that stepped up basis (taking into account deductible selling expenses, of course.) Typically, if the property is sold within a reasonable time after the passing of the original owner, there is very little (if any) gain to be taxed anyway.

Carl11_2

Employee

Oh yeah! On any HOA "Special Assessments", how you deal with those depends on what the special assessments were for. For example, a special assessment for a new roof on a condo complex would be a property improvement, and added to the cost basis. But even then, that special assessment has to be applied equally to all condo owners within the complex, in order for it to qualify.