When Are HOA Fees Tax Deductible?

In the US, there is a high chance that any home you buy will be inside an HOA. This means you are co-owner of the neighborhood and pay an extra monthly fee for neighborhood upkeep. The far less neighborly side-effect is that you are also subject to HOA fines for neighborhood violations - like choosing the wrong style fence or landscaping design.

HOA fees are notorious, both for increasing the cost of living and adding stress to your life. But ? One of the best ways to look on the bright side of a situation is whether it saves you money in the long run. It's true that in some circumstances, HOA monthly fees can be tax-deductible. But fines are not. DoNotPay can help you navigate HOA legal and financial obstacles, from unwanted fines to when you can get a nice tax deduction from your HOA fees.

How HOA Fees Work

There are two types of HOA fees: dues and fines. When you buy a home in an HOA, you are also buying some stake in the neighborhood. All the homeowners also own the park, pool, clubhouse, etc; and pay an ideally modest amount each year to upkeep nice neighborhood features. These costs are covered in regular dues, special assessments, and sometimes, the income from code violation fines.

Monthly and/or Annual HOA Dues

Monthly or annual HOA dues are a lot like property taxes but on a smaller scale. You pay a percentage of the annual upkeep along with other homeowners to keep the tennis courts and the pool in good condition year on year. Your regular dues can be tax-deductible under the right circumstances. Special assessments are less likely to be tax-deductible due to their purpose-exclusive nature.

HOA Citation Fines

Some HOAs bring in their income with citation fines. These are fees charged to homeowners for violating the CC&Rs and Bylaws of the neighborhood put together to build a community and protect property values. Common examples are no outrageous exterior paint, yard flamingos, and taking your trashcans up the drive on trash day. However, some HOAs get overzealous with rule-making and rule-enforcing. You might get a citation fine for a fence an inch too short or grass an inch too tall. HOAs can fine for a barking dog, a new deck, or just a tree swing. Some have been known to go after backyard clotheslines and interior renovations in addition to exterior rulings.

HOA Fees Are Tax-Deductible for Rental Houses

So when? The answer - the only answer - is rental houses.

With a rental house, the home is your business asset. It provides for the rental business and expenses related to the basic upkeep of rental homes are business expenses. In the rules of business expense tax exemptions, HOA fees count. At least, the regular HOA dues do. Monthly HOA fees are tax-deductible when the HOA home is a rental house.

It is not tax-deductible if the home is your primary residence. However, if you use the home for some months and rent it the rest of the year, you can claim a partial-year tax deduction on those months of dues where the home was rented.

Vacation rental properties are also tax-deductible, however, more HOAs are banning vacation rental usage.

When HOA Fees Are Not Tax-Deductible

HOA Citation Fines
Special Assessments
Residential HOA Dues

So when aren't HOA fees deductible? The only type of HOA fee that is tax-deductible is a monthly dues payment while the home is being rented. That leaves everything else in the "not tax-deductible" category.

HOA Citation Fines - Not Deductible

Fines and fees paid as a penalty are not tax-deductible, even when paid on behalf of your rental business. This could legally change if disputed, as renters (your clients) are often the cause of citation fines - like grass length and curtain choices - but currently, fines and fees are not included in tax-deductible HOA fees.

Special Assessments

A special assessment is a non-dues additional payment made by the homeowners to cover something for the neighborhood. Because special assessment payments are not a standard maintenance cost for the rental house, they are not typically included in tax-deductible expenses related to running the rental house as a business.

Residential HOA Dues

If you live in the home, the HOA dues are not tax-deductible. They are only deductible as part of the maintenance cost of business property - ie: a rental house.

How to Dispute HOA Fees and Fines on Your Own

Whether you're running a rental home or living in an HOA, naturally, you don't want your costs to be any higher than necessary. Maybe you can deduct your HOA fees, maybe you can't. But nobody likes to be slapped with extraneous fines or elaborate special assessment costs. There are several ways to lower the costs of living in an HOA, and disputing unwanted fines is one of them.

If you want to dispute fees and fines, you'll need to approach your HOA council which is run by elected volunteers from the community. You may need to file an official appeal and request for reassessment or speak at the next HOA council meeting to dispute the citation. Dealing with an HOA is often difficult and you can easily run into a council that won't budge on a citation or fine.

In this case, you'll need to get legal backup. HOAs often give way to a legal argument but not to individual homeowners.

Next Steps for Reducing HOA Fees if You Can't Do It Yourself

If your HOA won't budge, though you make a petition, submit the right letter, and see the council - you still have options. DoNotPay can help you take a legal stand against trivial citation fines and major financial assessments against an HOA home. We'll help you formulate the best arguments against the fees and your legal grounds for objecting to the fee. In many cases, HOA fines will be lifted if you just know how to apply the right kind of swift, practical pressure.

Here's how you can use DoNotPay to appeal fees:

1. Search "appeal fees" on DoNotPay, choose the Fight and Waive Fees product, and select the type of fee you want to appeal.

2. Select the merchant you want to appeal fees for and enter the details of your transaction, including an associated account if you have one.

3. Submit your case! DoNotPay will generate the best argument for your case and make sure your fee waiver request gets sent to the merchant for processing.

Why Use DoNotPay to Lower the Cost of HOA Homeownership

Owning a home in an HOA is undoubtedly valuable, but who wants to pay more fees than you need to? DoNotPay is here to help make homeownership easier and more affordable at every step. From licensing for your renovations to ways to lower your property taxes, we've got you covered. If you need to file your taxes to include HOA fee deductions or just dispute unfair HOA citation fines, our services are a helpful toolkit.

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What Else Can DoNotPay Do?

DoNotPay can help you make the most of your HOA homeownership by lowering costs and helping you find savings around every corner, from lowering property tax to filing the right tax deductions.