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, your condo fees usually aren't tax deductible. A few exceptions apply.
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 fees are 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.
When you use your condo as a rental property, you can subtract 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.
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.
Other Tax Deductible Costs
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.
- Nolo: Operating Expense -- Deducting Home Office Costs
- IRS: Instructions for Schedule E (Form 1040)
- The New York Times: Reducing the Tax Bite on Apartment Sales
- Condo Living Today: Save Taxes -- How Good Condo Expense Records Save You Money at Tax Time
- Bankrate: Home Sweet Homeownership Tax Breaks
- Bankrate: An Exception to Passive Activity Loss Rules
- IRS: Publication 587 -- Business Use of Your Home
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