Rental Property Cost Basis - HOA Mandatory Social Membership fees

Forum|Forum|4 years ago
February 9, 2022
1 reply
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I purchased rental property in a gated community and recently sold it. HOA dues PLUS social membership country club fees are mandatory for homeowners. At closing, I was charged $2,500 for the social membership initiation fee. I did not have the option to decline membership. Can I add this expense that I paid at closing when I purchased the rental property to the cost basis? If not, could it be a deductible business expense since it was a mandatory expense to own the home? I think I know the answer but asking anyway.

Best answer by ColeenD3

Since the fee was on a closing document, it is not a rental expense. HOA fees are usually paid monthly and would be a rental expense, as long as the property was business use.

It's odd that they charged you the other fee at closing and not prorated throughout the year. It would have been a legitimate rental expense like the HOA was since you needed to pay it to produce the income.

Unfortunately, seller closing costs do not include HOA or social fees.

Seller closing costs are made up of several expenses. Here’s a quick breakdown of potential costs and fees:

Agent commission
Transfer tax
Title insurance
Escrow and closing fees
Prorated property taxes
Credits toward closing costs
Attorney’s fees

ColeenD3Answer

Since the fee was on a closing document, it is not a rental expense. HOA fees are usually paid monthly and would be a rental expense, as long as the property was business use.

Unfortunately, seller closing costs do not include HOA or social fees.

Seller closing costs are made up of several expenses. Here’s a quick breakdown of potential costs and fees: