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How are fees and assessments
figured in a homeowners association?
ANSWER: Homeowners
association fees are considered personal living expenses
and are not tax-deductible. If, however, an association
has a special assessment to make one or more capital
improvements, condo owners may be able to add the
expense to their cost basis. Cost basis is a term for
the money an owner spends for permanent improvements
throughout their time in the home and is used to reduce
eventual capital gains taxes when the property is sold.
For example, if the association puts a new roof on a
building, the expense could be considered part of a
condo owner's cost basis only if they lived directly
underneath it. Overall improvements to common areas,
such as the installation of a swimming pool, need to be
considered on a case-by-case basis but most can be
included in the cost basis of any owner who can show
their home directly benefits from the work.
To find out more about how the IRS views condo
association fees, look online to IRS Publication 17,
"Your Federal Income Tax," which includes a section on
condos. Or order a copy by calling (800) TAX-FORM.
Where do I get information on condo association laws?
ANSWER: Resources: *
"The Condominium Bluebook" by Branden E. Bickel, B&
Piedmont Press; 2000. Order online. * Community
Associations Institute, Alexandria, VA; (703) 548-8600;
caionline.org.
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