Condominium fees cover the operation of the association that controls the common areas of a condo project. Depending on your project, the fees could pay for vacuuming hallways, painting the exterior of your building or keeping the pool clean. Since your condo is considered a personal expense, usually your HOA fees aren't tax deductible. However, a few exceptions apply.
Association dues are tax deductible if you have a home office or rent the property.
Taking the Home Office Deduction
When you claim a home office deduction, you're entitled to write off a proportional share of all of the expenses you incur in maintaining your home office. Because these include the condo fees that would be assigned to that portion of your unit, if you have a condo with six rooms and one of them is a home office, 16.67 percent of your association dues are tax deductible. If you prefer, you can also allocate your home office's share on a per square foot basis. To claim this deduction, you will need to meet the Internal Revenue Service's relatively narrow definition of a home office.
Deducting Rental Property Expenses
When you use your condo as a rental property, you can deduct all of your rental operating expenses off the top of your rental income. Your condo fees can be included in these expenses, as they are "ordinary and necessary." Furthermore, if you end up losing money on your condo after subtracting your rental fees and other expenses, you might be able to subtract that loss from your regular income, further sheltering you from taxes.
Understanding Assessments and Cost Basis
If your condo complex makes capital improvements to the property, you may be able to recover some of those costs, as well, in the form of reduced capital gains tax on profits when you sell. When you improve a property that you own, you're allowed to add the cost of those improvements to what you paid for the property.
Since capital gains are based on the difference between your total cost and your selling price after fees and commissions, those improvements help reduce your taxable profit. To claim this adjustment to your cost and your profit, get the information on what your condo spent on major improvements from its board or its board's accountant.
Examining Other Condo Tax Deductions
When you own a condo, you get the same write-offs that you would get with a house. You can still write off your home mortgage interest, subject to the same rules as a single family residence. Your property taxes are also deductible. Finally, if your condo association passes through tax-deductible costs to you as a part of your association dues and separates them on your statements, you may be able to write off those costs.
While it might seem unfair that you can't deduct your condo fees if you can't claim any of the tax deductions defined here, remember that you wouldn't be able to deduct most of the costs that condo fees cover with a traditional, detached home either.
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