In general, the Internal Revenue Service does not allow a taxpayer to deduct payments made to his homeowners association on his federal tax return. If a taxpayer has a home office that satisfies certain criteria, the IRS may permit him to deduct a portion of his HOA dues, however. Even if a person does not maintain a home office, the IRS will typically allow the individual to deduct certain expenses related to his ownership of a home on his tax return.
Homeowners’ Association Dues
HOA dues and the services they pay for vary depending on the type of home a person buys and the location of the individual’s home. If a person owns a condominium, for instance, his HOA dues may cover a portion of the costs related to the community’s master insurance, trash and recycling services, amenities such as a neighborhood pool and maintenance of communal areas. The amount a person must pay to cover his monthly HOA dues may fluctuate depending on increases or decreases in the costs of the services paid for by the community.
Permissible Homeowner Deductions
In order to deduct certain costs related to home ownership, the IRS requires a taxpayer to itemize his deductions on Schedule A of Form 1040. The IRS typically permits a homeowner to deduct interest on his mortgage, real estate taxes paid to a taxing authority and mortgage insurance premiums.
Home Office Deduction
The IRS may allow a person who has an office in his home to deduct costs incurred to maintain his working space, in addition to those a homeowner without an office can record on his tax return. Unlike a taxpayer without a home office, a person with a home office may deduct a portion of expenses paid for utilities, HOA dues, homeowners insurance, depreciation and security.
The amount of an expense the IRS permits a person to deduct depends on how big the individual’s office is in relation to the total square footage of his home. If a person owns a home that is 2,000 square feet and his office occupies 500 square feet, his office takes up 25 percent of his residence. If a person makes 12 monthly HOA dues payments of $100 totaling, $1,200 at the end of a year, the IRS permits him to deduct 25 percent of the total cost, or $300, on his tax return.
If a person’s home office is in an outlying building, such as an unattached garage or studio, the IRS only requires the individual to use the dedicated space regularly and exclusively to conduct his business for the IRS to recognize the space as a home office. If a person’s office is within his residence, the IRS also requires the dedicated space to be the principle space in which the person performs his work-related tasks in order for him to record home office deductions on his tax return.
- IRS.gov; Publication 530 -- Tax Information for Homeowners; December 2010
- IRS.gov; Publication 587 -- Business Use of Your Home; January 2011
- Real Estate Owner: Home Based Businesses Can Be Effective Tax Shelters
- PowerHomeBiz.com; Tax Time: Check What You Can Deduct From Your Home Office; Isabel M. Isidro; January 2007
- Quicken Loans; HOA Fees: What Do They Cover?; Gabriela Islas; April 2011
Deborah Barlowe began writing professionally in 2010. With experience in earning securities and insurance licenses and having owned a successful business, her articles have focused predominantly on finance and entrepreneurship. Barlowe holds a bachelor’s degree in hotel administration from Cornell University.