If you own a home in a community with a homeowners association (HOA), you’re likely paying monthly or annual HOA fees to cover shared amenities and maintenance in the area. But come tax season, you might wonder: Are HOA fees tax deductible in California and Florida? Is it possible to deduct them from your taxable income? The answer depends on how you use your property, and it can vary depending on whether it’s your primary residence or an investment property.
In this post, we’ll break down when HOA fees may be tax-deductible, using easy examples to explain the rules.
What Are HOA Fees?
HOA fees are regular payments made by homeowners in communities with a homeowners association. These fees help cover the costs of shared spaces and amenities, like pools, landscaping, parking areas, or building maintenance. For example, if you live in a condo with a pool, clubhouse, and shared landscaping, your HOA fees help keep those areas maintained and available.
The monthly or annual amount varies based on location, property type, and the amenities offered by the HOA.
Are HOA Fees Tax Deductible for Primary Residences?
Generally speaking, if you use your house as your principal residence, your HOA dues are not tax deductible.Whether you’re in California, Florida, or any other state, the IRS considers HOA fees a personal expense, which means they don’t reduce your taxable income.
Example
Imagine you live in a condo in Miami, Florida, and pay $200 per month in HOA fees. Since you use this property as your primary home, you can’t deduct the $200 a month in HOA fees on your federal income taxes.
The same rule applies in California. If you live in your property as your main home, you won’t be able to claim HOA fees as a tax deduction.
When Are HOA Fees Tax Deductible?
There are certain situations where HOA fees can be deductible, specifically if the property is used for business purposes. Here’s a look at some of the cases where you might be able to write off HOA fees:
- Rental Properties
- If you rent out a property, you can generally deduct HOA fees as a rental expense. HOA fees are considered part of the expenses you incur to maintain the rental property, which reduces your rental income for tax purposes.
- Example
Let’s say you own a rental condo in Orlando, Florida, and pay $150 per month in HOA fees. Since this condo is a rental property, you can include the $150 per month as an expense when you report your rental income. This deduction can lower your taxable rental income, potentially saving you money on taxes. - Home Office Deduction (Partial Deduction)
- If you use part of your home as a qualified home office for your business, you may be able to deduct a portion of your HOA fees. The home office must be your primary location and be used entirely and frequently for business-related activities in order to be eligible.
- Example
Suppose you live in a condo in Los Angeles, California, and have a dedicated home office that meets IRS requirements. You might be eligible to deduct 10% of your HOA dues if 10% of your house is used as a home office. So, if your HOA fees are $200 per month, you could potentially deduct $20 each month as a business expense. - Short-Term Rental Properties (Airbnb, VRBO)
- If you rent out your property part-time through platforms like Airbnb or VRBO, you may be able to deduct some of your HOA fees. The percentage of time the real estate is used for rental determines how much you can deduct. Be sure to keep accurate records of when the property is rented versus used personally.
- Example
Imagine you own a vacation condo in Destin, Florida, which you rent out for six months of the year. You may be allowed to claim half of your HOA dues as a rental expense because the apartment is rented out half the time. If your HOA fees are $300 per month, you may be able to deduct $150 per month during the months it’s rented.
Are There Differences in California and Florida?
For tax purposes, the rules around HOA fee deductions are the same in both California and Florida because they are governed by federal IRS guidelines. State taxes in California and Florida generally do not offer additional deductions for HOA fees.
Important Tips to Remember
- Keep Detailed Records: If you’re claiming a deduction for HOA fees, especially for rentals or home office use, keep clear records of your expenses, including the amount of HOA fees paid, the rental income received, and the percentage of time the property was rented.
- Check IRS Requirements: Deducting HOA fees for a home office or short-term rental has strict requirements. Make sure you understand the IRS guidelines, as deductions may be limited if the home office or rental space doesn’t meet certain qualifications.
- Consult a Tax Professional: HOA fee deductions can be complex, particularly when mixing personal and rental use. Consulting with a tax advisor can help you ensure you’re following IRS rules and maximizing eligible deductions.
In Summary
- Primary residences: Generally, HOA fees are not tax-deductible if you use the property as your main home, in both California and Florida.
- Rental properties: If you rent out your property, HOA fees are typically tax-deductible as rental expenses.
- Home office: For properties with a qualified home office, you may be able to deduct a portion of your HOA fees.
For those managing rental properties or running a business from home, understanding these HOA fee deductions can help reduce tax liability and improve the bottom line. Just remember, keeping detailed records and consulting a tax professional are key to taking advantage of these deductions while staying compliant with IRS regulations.