If you’re a homeowner, then you’re probably familiar with the HOA, or Home Owners Association. Whether you love it or hate it, it’s an essential part of owning a home. An HOA is essentially an organization within a neighborhood or property that enforces rules and regulations. Not all areas possess an HOA, but for those that do, when you purchase a home, you’ll most likely have HOA fees that may cover essential things such as external repairs and outside maintenance. Members of the community are required to pay these fees.

How HOA Fees Work

Some neighborhood HOAs are stricter than others, it depends on who is involved in the organization and what type of rules are prioritized in each community. If HOA rules are not being followed, the association can impose fines on those who aren’t aligned with their rules. Regulations and rules can be something as simple as paint color on the outside of the home. It can also be something more pressing, like not allowing cars to be parked on the street. Fees can depend on the property’s location, the type of property, the number of homes in the community, operating and landscaping expenses, amenities the community offers, and more.

For some home owners, HOA fees can be a pain. Paying your water bill, electricity, HVAC, internet, and cable is already stressful enough without an HOA fee added. With all of these responsibilities, it would be nice if there was some break at the end of the year, much like you get on paying property taxes. So, are HOA fees tax deductible?

Are HOA Fees Tax Deductible?

The answer isn’t a simple yes or no answer. In fact, it’s dependent on how you are using your property. If you’re a homeowner using your property as a private home year-round, then the answer is no. The HOA fee cannot be deducted from your taxes under this use. For most homeowners, this is the category they fall under. This is essential because the home is your personal and private property; therefore, your HOA is a private entity.

Vacation, Business, and Rental Properties

If you are using your home as a business or rental property, the rules are different. Any property that will be used as a rental property is tax deductible because the IRS considers the HOA fees on this type of property necessary for maintenance. Even if you only rent a few rooms or the garage or basement of your home, you are still eligible for a tax deduction.

For those using their home or property as a business, you can have your taxes deducted, but only a portion of them. You cannot have the entirety of the amount deducted. You can, however, itemize it, as the percentage used for business purposes is eligible for tax deduction. This also applies to those with a home office, as the percentage spent using it can be tax deductible.

For those who purchase a home as a vacation property, you are also eligible for a tax deduction. However, this does come with a set of rules. The IRS will only allow you to use your vacation property as a tax-deductible home during the months your property is being rented. The fees paid while you are living in the home are not considered tax deductible. For example, if the home is used as a vacation rental property for half the year, it is only tax deductible for those six months.

Federal tax law changes every year, so things can be a bit tricky when navigating, preparing, and filing your year-end taxes. It is always recommended that individuals consult a tax expert before filing.