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Your Ultimate Guide to HOA Fees

HOA fees — they are a staple in any given homeowners association. But, what are they exactly? And what purpose do they serve?


What Are HOA Fees?

What is an HOA fee? Also known as HOA dues, HOA fees are fees that homeowners associations collect from its members, i.e. homeowners. When homeowners purchase a property within the HOA community, they agree to a set of covenants and rules set forth by the association. This includes paying HOA fees.

While HOA fees are paid regularly, the exact frequency depends on the association. Some HOAs have an annual payment setup, while others use a quarterly structure. More often than not, though, HOAs charge fees on a monthly basis.


What Do HOA Fees Cover?

Homeowners associations require funding in order to operate smoothly and continuously. But, not all HOAs are created equal. As such, the services HOA fees cover can vary from HOA to HOA. Typically, though, you can expect your homeowners association dues to cover the following:

  • Maintenance and Repairs. Common areas and shared spaces require regular maintenance and the occasional repair work. In order to keep the community looking great and functioning well, a portion of the HOA fees should be allocated to maintenance and repairs.
  • Landscaping. Beautiful landscaping can have a significant impact on curb appeal. When curb appeal is high, property values tend to follow.
  • Insurance. Every HOA requires appropriate insurance coverage for various liabilities.
  • Amenities and Services. Living in an HOA community grants you access to members-only amenities such as swimming pools, private parks, clubhouses, playgrounds, and fitness centers. HOA fees also usually cover services such as trash removal, snow removal, and security services.
  • Reserve Fund Contributions. All HOAs need a reserve fund, which is set aside for future replacements, emergencies, and unexpected expenses.

If you want to know what HOA fees cover, it is imperative to ask the association you intend to join. Therefore, make it a part of your routine to ask for a copy of the HOA’s governing documents, especially the CC&Rs. These documents will contain specific information on restrictions and coverages.


How to Calculate HOA Fees

The process of calculating how much to charge homeowners in HOA fees is relatively simple. The HOA board is responsible for determining the amount after planning the annual budget.

They go over what the HOA expects to incur in costs for the upcoming year. This includes maintenance and repair services, insurance, utilities, landscaping, wages, and other vendor services. They also make sure to allocate enough money to maintain the right reserve fund level.

After arriving at the total anticipated expenses, they will then divide this by the number of homeowners in the community. This is the amount each homeowner must pay for the year. If the HOA collects on a monthly basis, the amount is further divided by 12. Keep in mind that board members are not exempt from paying HOA dues.

It is worth noting that not all HOAs divide the total expenses equally. Some homeowners may need to pay a larger fee depending on the size of their property. As always, it is best to check your HOA’s governing documents for confirmation.


How Much Are HOA Fees?

While there is no blanket answer to this question, average HOA fees can give you a rough estimate of how much you should set aside. HOA average costs can change depending on your location and the type of community you live in as well as what amenities and services your HOA provides. It could extend anywhere from $100 to $1,000. On average, though, HOA fees tend to play between the $200 to $300 range.


Why Are HOA Fees Too High?

homes in an upscale residential neighborhood | hoa duesThere are a few factors that can influence how much an HOA charges homeowners in monthly dues. A high delinquency rate, for instance, can tip the scales.

If there are too many homeowners not paying their dues on time, the HOA board might raise the fees in order to make up for the loss and stay solvent. Emergencies can also cause homeowner association fees to rise.

Sometimes, though, expensive HOA fees are a sign of poor financial management. It could indicate that the HOA is paying too much for services or is in a bad contract with a vendor. There have even been a handful of fraud cases involving HOA funds.

It is essential for the HOA board to remain transparent when it comes to financial activities. The board should always present the annual budget and financial statements to homeowners. This way, homeowners know where their money is going.

If you want to review your association’s financials, you can usually request a copy from the HOA board. After all, homeowners have a right to review the HOA’s financial records. Should the HOA board refuse to comply with a reasonable request, the homeowner can take legal action.


Low HOA Dues Can Be Equally Bad

On the other hand, having low HOA dues is not necessarily a good sign either. When fees are too low, it could mean that the association is skimping on essential maintenance and services. In doing so, it fails to provide homeowners with adequate common areas and amenities.

You might not immediately feel the effects of subpar maintenance. But, over time, you will start to notice things around your community not working properly. Furthermore, poor maintenance can affect curb appeal and bring down property values along with it.

Charging HOA fees that are too low can also give way to surprise costs. With a lack of funding, the HOA will be forced to levy special assessments when unexpected expenses crop up. And nobody wants to pay extra for something that should have been covered by the HOA fees from the beginning.


What Happens If You Don’t Pay HOA Fees?

Some homeowners might not want to pay HOA fees for whatever reason. When that happens, the HOA has multiple recourse options. Provided state laws and the HOA’s governing documents allow it, these options include but are not limited to the following:

  • Late Fees. The HOA board can charge late fees when a homeowner misses a deadline for paying association dues.
  • Suspension of Rights. Delinquent members may have their rights revoked until they settle their balance. This includes the right to use community amenities and the right to vote.
  • Small Claims Court. With the help of an HOA attorney, the board can choose to take the delinquent homeowner to a small claims court to force the member to pay.
  • Lien. Placing a lien on the homeowner’s property usually happens in more serious cases, but it remains a possibility even for smaller debts.
  • Foreclosure. When the homeowner still refuses to pay their overdue HOA fees (plus any late fees), the HOA can foreclose on the lien and seize your property. Foreclosures can also affect your credit score.


How to Get Out of Paying HOA Dues

Homeowners agree to abide by the covenants and rules of the HOA when they purchase their property. Part of that is consenting to the payment of regular HOA fees.

By now, you already know that there are certain consequences of refusing to pay HOA dues. You could even lose your home. If you are struggling financially, consider talking to your HOA board and asking them to set up a payment plan that works for you. But, unless you want to face the repercussions of defaulting on your dues, it is best to continue paying them.


A Symbiotic Relationship

Living in an HOA community offers many benefits. These benefits, though, come with a price — HOA fees. Sometimes, people only rebel against something because they don’t understand it. Now that you know what HOA fees are for, you can think of it as quid pro quo. Your HOA provides you with value in the form of maintenance, services, and amenities in exchange for your diligent payments.

Collecting HOA fees can be a hassle if you lack the proper tools. With HOA management software from Condo Manager, you can streamline processes with ease. Schedule a free demo, call us at (800) 626-1267, or contact us online for more information.




When Should Your Association Levy HOA Special Assessments?

In certain situations, a homeowners association may decide to levy a special assessment. Most homeowners are not amenable to this because of the unexpected financial burden. To prevent any misunderstandings between homeowners and the board, here’s what you need to know about HOA special assessments.

The Basics of HOA Special Assessments

Living in an HOA community comes with perks and privileges. You gain access to attractive amenities such as swimming pools, basketball courts, and gyms, as well as convenient services like landscaping, maintenance, and security. In order to pay for the maintenance and upkeep of these common areas, the HOA will collect monthly or quarterly assessments. However, many new homeowners are surprised when they are asked to pay for an additional fee called HOA special assessment.


What Is an HOA Special Assessment?

Compared to monthly or quarterly HOA assessments, HOA special assessments are one-time fees used to finance capital improvement projects. Ideally, HOA reserves fund capital improvement projects.

However, not all associations are able to maintain adequately funded reserves. HOA boards may also decide to levy a special assessment due to significant property damage following a natural disaster. Since these events are unexpected, the association may not have saved enough to pay for the repairs and replacements.


Are Homeowners Required to Pay for HOA Special Assessments?

Yes, homeowners are legally obligated to pay HOA special assessments. Every HOA will have a section regarding special assessments written in their Covenants, Conditions, and Restrictions (CC&Rs). A standard Covenant to Pay Assessments will include the annual/quarterly/monthly assessment dues, assessments for rule violations, and special assessments. Upon joining an HOA community, homeowners sign a contract which means that they accept all the stipulations in their governing documents.


How Does a Special Assessment Work?

hoa admin meeting | hoa assessmentHOA boards must first send an HOA special assessment notice to inform homeowners of an impending collection. However, if the amount exceeds the HOA special assessment limit stipulated in the governing documents, the board must obtain approval from the homeowners.

For instance, the governing documents stipulate that special assessments must not exceed 5% of the total budget. If the HOA needs more than 5%, they must hold a meeting with a quorum. The board needs a majority vote to proceed with the special assessment. Although, this requirement can be waived in emergency situations.

The board must send the HOA special assessment notice 30 to 60 days ahead of the established due date. After the due date, homeowners who do not pay their assessments within 15 to 60 days may be declared delinquent. The HOA can levy late fees and interest charges. They could also place a lien on delinquent homeowners’ properties.


How Are Special Assessments Calculated?

When the board collects a special assessment, the total amount must be equally divided among the homeowners. Each homeowner must pay the same rate.


Does Homeowners Insurance Cover Special Assessments?

If homeowners have loss assessment coverage, their insurance provider may cover the costs of HOA special assessments. Make sure to double-check with your insurance provider to avoid unexpected or surprise charges.


Reasons to Levy HOA Special Assessments

HOA boards have the authority to levy a special assessment on homeowners. However, they must abide by the HOA special assessment rules or limits written in the governing documents. Here are possible reasons why your HOA might levy a special assessment.


1. A Special Assessment to Cover Inadequate Assessments

The HOA may levy a special assessment if they determine or anticipate that the association funds will not be enough to cover the expenses for the fiscal year. This could be due to extraordinary circumstances, which led to spending more than what was budgeted, or it may also be due to improper budgeting.


2. A Special Assessment Due to Defray Costs of Capital Improvement Project

HOA special assessments can also be levied to cover the costs of capital improvement projects. If the association’s reserves are not enough, the special assessment may be necessary to pay for the repairs or replacements of major components or assets.


3. A Special Assessment Due to Insufficient Insurance Coverage

insurance coverage | hoa special assessmentHOAs can rely on their insurance coverage to cover the costs of property damage due to natural disasters. However, there are instances when the insurance payout is not enough to cover.

Thus, the board may decide to levy a special assessment to make up the difference between the insurance payout and the actual cost of repair or replacement.


4. A Special Assessment to Replenish Reserves

HOA boards may levy a special assessment to replenish the reserve account. Associations must always have an adequate amount saved in their reserves in case there are emergencies, natural disasters, and other unfortunate situations.


5. Other Reasons Deemed Appropriate by the Board

The board has the authority to levy special assessments for reasons that they deem appropriate. They could use it for expenses incurred as a result of performing their duties and obligations. However, in some cases, the governing documents will first require approval from the homeowners via a majority vote.


What Are Special Individual Assessments?

There are also cases where the HOA board may levy special assessments to specific homeowners. Here are some possible reasons for levying special individual assessments.

  • A special assessment to cover property damage in common areas caused by the willful misconduct or negligence of a homeowner.
  • If a homeowner’s property is creating a nuisance or hazard, the HOA may levy a special assessment to cover the costs of correcting the said nuisance or hazard.
  • If a homeowner’s action results in the increase of HOA insurance rates, the board may levy a special assessment to cover the additional insurance costs.
  • A special assessment to cover the delinquencies of a homeowner who was responsible for maintaining/overseeing a project.


Understanding Why Boards Levy HOA Special Assessments

It can be shocking to receive a notice for a special assessment — on top of the HOA fees that you already have to pay. However, homeowners must also understand the reasons why the board has decided to levy the special assessment. If major components are left unfinished or utilities are left unpaid, there will be major consequences for the entire community. Your quality of life could deteriorate without the added funds from HOA special assessments. To avoid them in the future, homeowners should consider working with the board to find better financial management solutions.

Need help with HOA special assessments? Condo Manager has the software that can make HOA financial management a breeze. Call us at (800) 626-1267, email us at sales@condomanagerusa.com, or contact us online to learn more about our HOA software solutions.




HOA Management Fee: Are They Charging You Right?

Part of hiring an HOA property management company is paying a set fee in exchange for services to the association. But, how can you separate the reasonable fees from the questionable ones? The key is to understand how an HOA management fee works.


What Is an HOA Management Fee?

Homeowners associations don’t run on their own. They require a set of directors, the HOA board, to oversee and ensure the smooth operation of the community. These board members, though elected into their positions, don’t receive compensation for carrying out their duties. In essence, they are volunteers.

Because HOA board members usually have full-time jobs and personal lives outside of the association, they don’t always have the time or skill to perform day-to-day tasks. This is why many HOAs and condo associations turn to management companies for help.

But, hiring a management company does not come free. This is where HOA management fees come in. An HOA management fee is an amount charged to homeowners associations by HOA property management companies in return for services.

Who pays for the HOA management fee, though? Simply put, the association — and, by extension, the homeowners — pays for the management fee. The HOA board includes the management fee in the annual budget, which is then divided among all the homeowners in the community, board members included.


Does My HOA Need a Management Company?

homeowner's association board | hoa manager feeMany HOA boards struggle with the fulfillment of their daily responsibilities either due to a lack of time or expertise. If that situation sounds familiar to you, then perhaps it is time to receive help from a professional HOA management company.

Usually, when you hire a management company, the company pairs your community with an HOA manager. This HOA manager will assist you with the day-to-day operations and act as a liaison between you and the management company.

Although the services offered can vary, most companies provide the following services:


1. Accounting and Financial Management

Not everyone is equipped to do accounting or handle the finances of an entire community. An HOA management company can take care of bookkeeping, advise you on financial matters, and assist with financial reports. Some companies perform the accounting tasks in-house, while others partner with third parties.


2. Collections

Managing the collection of HOA dues can come as a challenge, especially when you have a lot of delinquent accounts. A management company typically offers collection services in addition to financial management. Some companies don’t handle collections on their own and, instead, refer you to a collection agency they trust.


3. Rule Enforcement

HOA managers can conduct inspections for violations and coordinate with the board to enforce the rules. This can range from sending out violation notices to towing an improperly parked vehicle. Of course, HOA managers don’t take action without consulting the board first. The board still retains decision-making authority.


4. Homeowner Communication

Communication is paramount to maintaining transparency — a valuable facet of running a community. HOA managers can use a wide range of communication tools to disseminate information to homeowners. They can also handle complaints, send notices, and manage newsletters.


5. Legal Assistance

Though not all companies offer this service, some do. An HOA management company can help you navigate the often-confusing world of HOA laws and ensure you remain compliant. This can include federal laws such as the Fair Housing Act and Americans with Disabilities Act as well as state and local laws. If nothing else, a management company can refer you to an attorney with experience handling HOA communities.


6. Vendor Management

From creating and sending RFPs (request for proposal) to coordinating with existing vendors, an HOA manager can do it all. As with rule enforcement, though, HOA managers don’t get to pick the vendors for your community. The HOA board still has the final say on which vendor to choose, and an HOA manager can only offer advice.


7. Insurance

Every HOA needs sufficient protection in the form of insurance. An HOA management company can connect you with the best insurance providers and handle claims on your behalf. Keep in mind, though, that most management companies charge extra for insurance services.


How Much Do HOA Management Companies Charge?

contract or agreement | hoa management company costsIt is important to understand that not all companies offer the same services and have the same fee structure.

Therefore, it is difficult to blindly determine how much you should expect to pay in HOA management company fees. What you can do, though, is rely on average costs.

Typical HOA management fees consist of the following charges:


Initiation Fees

This is the start-up fee or how much you should expect to pay for the company to assume the daily management of the HOA. To calculate this fee, the HOA management company considers the workload involved, such as file transitions, banking, bookkeeping, and software changes. Because this fee is reliant on workload, small communities usually pay smaller initiation fees (perhaps a couple of thousand dollars), while larger communities might pay $30,000 or more.


Ongoing Management Fees

The ongoing management fee is the regular fee an HOA pays, usually on a monthly basis. This fee is included in the contract and usually negotiated between the company and the HOA beforehand. On average, companies charge an HOA manager fee of $10 to $20 per unit per month in exchange for management services. Though, the amount can vary depending on the location and size of the community.


Exit Fees

If your HOA switches from one management company to another, expect to pay an exit fee. This is the fee charged by your current company to help with the transition process. The exit fee amount can vary wildly depending on the company. Make sure to go over the contract with your management company to see how much you should expect to pay for the transition. Perhaps you can negotiate to a lower price.


Caution: Suspicious HOA Management Fees

While you may want to believe that all HOA management fees are reasonable, the unfortunate truth is that some companies have hidden charges. To make matters worse, these hidden HOA management company costs are usually questionable in their purpose. Here are some examples of suspicious fees that some companies bill to HOAs:


1. Meeting Fees

It is common and rational to assume that your HOA manager should attend board meetings. After all, they need to know what is happening in the community to help run it. Some companies, though, will charge you extra for sending a representative to such meetings.

Thus, it is imperative that you ask your management company about their policy on meeting attendance. You might ask your HOA manager to come and be surprised about an additional fee at the end of the month. Some companies charge extra if you meet more than once a month, while others bill $50 to $100 per hour if your meetings take place after regular work hours.


2. Fees Per Instance

Some management companies charge a set fee every time they need to perform an activity. This activity, whatever it may be, can change depending on the company. Some charge you a fee per collection, while others charge you a fee for each demand letter they send.

To protect your HOA from this kind of questionable fee, you must stay vigilant and review your contract before signing it. This will save you a lot of time, headaches, and money. After all, you don’t want to increase HOA dues or levy special assessments just to make up for an oversight you committed.


3. Miscellaneous Fees

Other fees management companies can charge include newsletter printing costs, general contractor fees, inspection fees, document preparation fees, and the like. Some companies get really creative with their hidden fees and find new ways to charge you extra for something you thought was already included in the fixed HOA management fee.

Again, the best way to avoid surprises is to do your due diligence and review your management contract thoroughly. In addition, you can ask the HOA management company directly if they charge any other fees outside of the initiation fees, ongoing management fees, and exit fees.


Making a Decision

When assessing whether or not an HOA management fee is worth it, weigh the price against the services the company provides. Sometimes, the extent and quality of a company’s services justify the more expensive prices they charge. Just remember to work within your budget and make sure you get the services you need. And don’t forget to check for extra or hidden fees!

Management software can significantly reduce the amount of time and work needed to run an HOA or condo association. Both management companies and self-managed communities can benefit from Condo Manager USA. Schedule a free demo, call us at (800) 626-1267, or contact us online for more information.




Condo Fees: Everything You Need To Know

Condominiums are becoming increasingly popular in the United States, with many choosing to live in condos due to their affordability and convenience. But, with condo living comes condo fees.


What Are Condo Fees?

If you have ever lived in a condominium, then you know there are common areas that all owners share. These common areas, though, do not just maintain themselves. All owners are responsible for keeping these common areas in good condition. This is where condominium fees come in.

Condo fees, also known as condo maintenance fees, are fees that condo owners pay to the condo association (COA). The association then uses these fees to pay for various maintenance and repair costs. Condo owners pay these fees on a regular basis. Depending on the association, it could be on a monthly, quarterly, semi-annual, or annual basis.

Given the number of condominiums nowadays, it is essential to weigh your options first before coming to a decision. That means comparing the cost of condo dues as well as what these fees cover. After all, not all condo associations charge the same fees for the same things. For instance, a COA’s fees might cover the cost of common area maintenance but not trash removal services.

Are condo fees and HOA fees the same? In a lot of ways, condo fees and HOA fees are the same. But, the difference is that condominium fees related to condo associations, while homeowners association fees relate to — surprise, surprise — homeowners associations. The former exists to cover the maintenance and repair of common areas, which all condo owners have joint ownership of. On the other hand, in a homeowners association, the common areas are owned by the HOA.

Additionally, you may wonder, “Do all condos have HOA fees?” Almost all condominiums charge fees to owners for the maintenance and upkeep of common areas.


What Is Included in a Condo Fee?

condo amenities | condo maintenance fees

Before choosing a condominium to live in, you must first understand how condominium fees work and what they cover. Again, not all condo maintenance fees cover the same things.

So, what do condo HOA fees cover? Typically, a condominium maintenance fee covers the maintenance of amenities and common areas. This includes landscaping, lobbies, sidewalks, patios, tennis courts, gyms, and elevators. They might also cover utilities, wages, management fees, and emergencies.

Apart from the operating fund, which the association uses to pay for day-to-day expenses, condo associations should also have a reserve fund. The association taps into this fund to cover the cost of large repairs or replacements as well as contingencies. Every association must keep its reserves properly funded.


How Are Condo Association Fees Calculated?

Every condo association has a set of members, called the board of directors, who manage the association. Along with overseeing the maintenance of the community, the board also carries the task of preparing the budget for the upcoming year. From this, the board can calculate how much to charge each condo owner in fees.

To prepare the budget, the condo board must consider all of the association’s basic expenses. They anticipate how much the COA expects to pay for things like trash collection, snow removal, landscaping, and other maintenance work. They also take into account things like insurance, utilities, housekeeping, property taxes, legal fees, wages, office expenses, etc.

Once the board has a projected cost of expenses in mind, they will then divide this by the total number of condo owners in the association. This includes the board members themselves as they are not exempt from paying condo dues.


Condo Fees on Average

How much are condo fees? Condominium fees can vary from association to association. If your condominium has a lot of amenities, your fees tend to reflect that. After all, swimming pools, tennis courts, gyms, and outdoor areas cannot stay in good condition without proper care.

Similarly, larger amenities also usually command a higher condo fee given the extent of maintenance required. The location and exclusivity of your condominium can also play a part in influencing the cost of your condo fee. If you live in an upscale neighborhood, then expect to pay a higher condo fee. Some associations even calculate fees based on how large your unit is.

Condo maintenance fees can vary wildly from $50 to $1,000. Again, there are a lot of factors that can affect the cost. Average condo fees, though, sit somewhere in the $300 to $400 range.


Can the Board Increase Condo Fees?

The short answer is yes. Condo boards do hold the power to raise condo maintenance fees, provided the association’s governing documents say so. Some states have laws regulating the increase in fees, though. For example, according to Civil Code Section 5605 in California, a condo board may not raise the fee by more than 20 percent of the amount levied the previous fiscal year.

Additionally, your association’s CC&Rs might have certain restrictions about a fee increase. It is worth noting, though, that should your CC&Rs conflict with state laws, the latter takes precedence.


Why Are Condo Fees So Expensive?

The location, exclusivity, and amount or extent of amenities in your condo can affect the cost of your fees. If you feel like your fees are too high, though, the condo board should take a look at some of the ways it can reduce the association’s expenses.

Investing in energy-efficient solutions, for instance, can have a long-lasting impact on a condominium’s budget. Additionally, condo associations should not be afraid to ask for special promos or discounts from vendors. It is also worth digitizing COA processes with the help of management software.


What Happens When You Don’t Pay Condo Fees?

condo owners association dues | average condo feesIf your daily living expenses are already too high for you to handle, you may feel tempted to skip paying your condominium fees altogether. That is a bad idea, though.

These fees are mandatory, which means there is no way you can get out of paying them. Once you agree to live in a condo managed by an association, you agree to its many stipulations as well. That includes paying condo dues.

Condo owners who default on their payments can face a number of potential consequences. Depending on what state laws and a COA’s governing documents permit, a condo board can impose one or all of the following:

  • Charge a Late Fee. Failure to pay your dues on time can result in a late fee.
  • Restrict Owner Privileges. The condo board can suspend your privileges and restrict your access to condo amenities if you stop paying your fees.
  • Take Legal Action. Refusing to pay your fees can lead to the board filing a lawsuit against you. In more extreme cases, the condo board may file a lien on your unit and initiate a foreclosure.

Given the severity of some of these outcomes, it is best to simply pay your dues on time. If you are experiencing financial troubles, talk to your board about setting up a payment plan.


Take Everything Into Consideration

While it is true that condo living poses many benefits, it also comes with responsibilities. Whether or not you intend to use a condo’s amenities, you still need to pay condo fees regularly. As such, before you dive straight into a decision, you must examine all the pros and cons first. Condo living is not for everyone, but it is certainly a lifestyle worth considering.

Managing a condo association can come as a challenge, especially if you have little to no experience. Condo Manager streamlines and automates most of the management processes, making it easier for any condo board or management company. Call us today at (800) 626-1267 or contact us online for a free demo.



Are HOA Fees Tax Deductible?

Tax season is always a stressful time of the year. One of the questions HOA residents commonly ask is, “Are HOA fees tax deductible?” The answer, though, is not as simple.


Are HOA Fees Tax Deductible?

A homeowners association runs a community by imposing certain rules, preserving its aesthetics, and maintaining various aspects of the neighborhood. It does this with the help of HOA dues — fees that the association collects from members. These fees are used to fund the association’s maintenance and operations.

Those who live within an HOA community, though, often wonder, “Are HOA dues tax deductible?” The short answer is no. If you use the property as your primary residence, then your HOA fees are not deductible. There are certain exceptions, though, such as if you use the property as a rental property or a place of work.


Are Condo Fees Tax Deductible?

Condo fees essentially serve the same purpose as HOA fees, except condo fees are charged to unit owners by a condo owner’s association (COA). When you join a COA, you agree to abide by its covenants, one of which is to pay condo fees.

Are condo fees considered rent? No, condo fees are not the same as rent. These fees go into the maintenance and upkeep of common areas, which condo owners share joint ownership of. In a COA, the common areas belong to the owners, as opposed to an HOA, where the common areas belong to the association itself.

When it comes to taxes, a similar rule applies to condo fees as with homeowners association dues tax deduction. You cannot deduct condo fees from your taxes because the IRS deems this as a personal expense. Condo fees, just like HOA fees, cover the day-to-day maintenance expenses of a condo building, such as cleaning services and snow removal. Since personal expenses are not tax deductible, there is no reason to make condo fees deductible because they pay for virtually the same things.


Can You Write Off HOA Fees If You Work from Home?

Tax Cuts and Jobs Act | is hoa tax deductibleYes, you can write off HOA fees if you use your home as an office. This is an exception to the rule.

You can deduct certain expenses, including HOA fees, related to your home office. Though, it is important to keep in mind that even this exception has requirements.

For one thing, according to the Tax Cuts and Jobs Act, you must be self-employed to enjoy this benefit. If you are employed and just working remotely from your home, this does not apply to you.

Your home office must also serve as your primary place of business. That means it should be where you perform administrative work or meet with customers.

Additionally, it should be a designated area in your home. It can be anywhere from a corner desk to an entire room. But, it cannot be something as small as just using your laptop on your bed or sofa. You may also need to supply photographic evidence supporting your claim of a home office, especially in the event of an audit.

You can deduct expenses equivalent to the percentage of your home office. For example, if you claim to use 10 percent of your home as an office, you can write off 10 percent of your expenses. That includes your property taxes, mortgage interest, utilities, repairs, and HOA fees.


Are HOA Fees Tax Deductible for Rental Property?

Yes, you can deduct your HOA fees from your taxes if you use your home as a rental property. The IRS considers HOA fees as a rental expense, which means you can write them off from your taxes. Therefore, if you use the home exclusively as a rental property, you can deduct 100 percent of your HOA fees.

Rental property tax deductions also apply if you rent out only a portion of your house, such as a basement apartment or garage. In that case, you can deduct a portion of your HOA fees equal to the percentage of your house that you use as a rental space.

The concept persists if you use the property as a rental part-time. For example, if you reside in the property 50 percent of the time and use it as a rental for the other 50 percent, you can deduct 50 percent of expenses, including HOA fees.

What about condo fees? Is condo fees tax deductible on a rental property? Yes, if you rent out the condo unit, you can also deduct condo fees from your taxes. It works in a similar fashion as HOA fees.


What Expenses Can You Write Off on a Rental Property?

Apart from HOA or condo fees, you may deduct other expenses from your taxes if you use the property as a rental. This includes your property tax, mortgage interest, depreciation, operating expenses, and repairs.

You may write off ordinary and necessary expenses for the maintenance and management of your rental property. Ordinary expenses are common expenses, i.e. generally accepted expenses in the business. On the other hand, necessary expenses are expenses like interest, taxes, insurance, utilities, maintenance, and advertising.

Although you can deduct the cost of materials required for the maintenance and repair of your rental property, you cannot deduct expenses for improvements.


Can You Write Off Special Assessments on Taxes?

This is another common question many homeowners ask. Are assessments tax deductible? Homeowners associations typically charge special assessments to cover unexpected expenses. As a rule of thumb, you cannot write off special assessments on taxes. If you rent out the property, you might be able to deduct it if the assessment is used for maintenance and repairs. But, if it is used for improvements, it is not tax-deductible.


How Do I Deduct HOA Fees?

Schedule E Form 1040 | are hoa dues tax deductibleAssuming you qualify for the deduction, you must report the HOA fees on your Schedule E (form 1040). This is the form you use to report your income or loss from different classes, such as partnerships, royalties, estates, S corporations, and trusts.

It also applies to rental real estate. You should do this when you submit your HOA tax return.

According to the IRS, you can deduct up to $25,000 if you are actively engaged in managing your rental property. Should you suffer a loss for the year, though, you can carry over the excess to the following year. For example, if you recorded a loss of $35,000, you can deduct $25,000 the current year and deduct the remaining $10,000 the next year.


Is HOA Tax Deductible? Answered!

Are HOA fees tax deductible? It depends. Generally, you cannot deduct HOA fees from your taxes, though this comes with a few exceptions, as discussed above. It is always best to seek help from a tax professional when preparing your taxes, though. This way, you can avoid issues with the IRS.

Self-managed communities and HOA management companies can benefit from the HOA management solutions Condo Manager provides, including accounting and financial management. Our software makes it easy to stay on top of your financials, which, in turn, makes tax season a breeze. Call us today at (800) 626-1267 or contact us online for a free demo.




What’s The Difference Between HOA Assessments And HOA Fees?

What is an assessment fee? Contrary to popular belief, HOA assessments are not exactly the same as HOA dues. It is essential to learn the difference between the two, especially if you are considering moving into an HOA community.


Separating HOA Assessments from HOA Fees

Before moving into any community governed by a homeowners association, it is imperative to evaluate any related fees that you might need to shoulder. No two associations are the same, so one HOA might charge a higher fee than another.

What is the difference between dues and assessments? To understand the distinction between these two terms, you must first understand how a homeowners association works. Homeowners associations exist to maintain the community, hence, keeping property values high. To carry out this type of work, HOAs naturally need to source their funds from somewhere. Enter you, the homeowner.


What Are HOA Fees?

hoa fee | hoa special assessmentsHOA dues, which are sometimes referred to as HOA fees, are recurring fees homeowners pay to the homeowners association. The association uses these fees to cover the cost of maintenance and repairs required to keep the community’s common areas in good shape.

This includes landscaping expenses, insurance premiums, legal fees, utilities, and the like. Additionally, homeowners receive access to community amenities, such as clubhouses, pools, and tennis courts, in return.


What Are Special Assessments?

What is a special assessment? An HOA special assessment, also known as simply assessments, is a one-time fee imposed by a homeowners association to its members. Typically, HOAs only charge special assessments when unanticipated expenses arise.

For example, if a disaster occurs that affects the community, the HOA would usually turn to its insurance provider. But, if the HOA’s insurance is not enough to cover the cost of the associated expenses, it might need to levy special assessments. Another instance where an association may need to charge homeowner assessments is if the HOA board made inaccurate budget projections.

It is worth noting that homeowners associations should have a reserve fund with sufficient money to cover unexpected costs as well as major repairs and replacements. This is why it is important to perform a reserve study every few years to keep a healthy reserve level. Special assessments are usually the last resort for HOAs.


Calculating HOA Assessments vs HOA Dues

How are HOA dues calculated? The association calculates how much homeowners should pay based on the annual budget. Typically, the HOA board drafts a budget for the upcoming fiscal year consisting of projected expenses.

From this total amount, the board will divide it either equally or according to certain terms across all homeowners. You can find specific provisions for calculating HOA dues within the association’s governing documents. State laws may also play a role in determining your HOA dues.

How are HOA assessments determined? Most of the time, the amount the association needs to cover the cost of the unanticipated expenses will dictate how much it levies against homeowners.

For example, if the HOA requires $10,000 to pay for uninsured damages, it will split that amount among all the members of the association. The formula used to split the charge, though, will depend on the association’s HOA special assessment rules. To learn how your association divides up assessments, refer to your governing documents.


Assessments and Dues: Are There Limits?

Many factors can influence the cost of HOA dues. For instance, if you live in an affluent neighborhood, your HOA dues are likely higher than the average association. The nature and extent of an association’s amenities and common areas can also affect dues amounts because there are more expenses involved.

Can an HOA raise the fees? Yes, though there is usually a limit as to how high an HOA can increase its dues. You will normally find such stipulations within the HOA’s governing documents or state laws. Associations in Arizona, for instance, cannot raise dues by more than 20 percent without securing a majority vote from members.

Many CC&Rs also have regulations limiting the amount of the special assessment HOAs can charge. Some associations have a fixed amount, while others work on a percentage basis. It is necessary for homeowners and board members alike to familiarize themselves with the HOA’s governing documents. This way, you know what to expect and when an HOA board is in breach of its authority.

There are also some states that have laws that impose an HOA special assessment limit. In California, Civil Code Section 5605 mandates that associations cannot charge assessments that exceed 5 percent of the preceding year’s budgeted gross expenses without obtaining approval from members. Check your state laws to see if any regulations apply to your HOA assessments.


Can HOA Special Assessments Be Written Off?

Are special assessments tax deductible? In a word, no. You usually cannot deduct special assessments from your taxes. But, if you use the home as a rental property, you may be able to write it off. It is always best to check with your tax adviser first, though, to avoid any problems with your taxes.


Can I Get Out of Paying HOA Assessments?

hoa dues | hoa special assessmentMany homeowners wonder how to fight a special assessment or their monthly dues. Unfortunately, there is generally no way around these.

Homeowners agree to follow the covenants and rules within their association, including paying fees and assessments. So long as the HOA is exercising its power to levy assessments correctly, then you really have no choice but to pay it. Keep in mind that board members are not exempt from paying HOA assessments.

There will always be delinquent homeowners, though, in any given HOA. In case you fail to pay your dues and assessments, the association can force compensation through a number of means.

  • Impose a Late Fee. Can an HOA assess fines? Yes, many associations do have the ability to charge penalties or fines if a homeowner has violated a covenant or rule. This includes defaulting on dues and assessments.
  • Revoke Privileges. In some cases, an HOA may suspend your rights and privileges as a consequence of nonpayment. This can include anything from your right to vote on association matters to suspending access to community amenities.
  • Take Legal Action. An HOA can file a lawsuit against delinquent homeowners to force payment.
  • Attach a Lien. When you fail to pay your dues and assessments, a lien will automatically attach to your property. If you live in a super-lien state, the HOA’s lien has superiority over all other lien holders.
  • Foreclose. An association has initiate foreclosure on a lien, causing you to lose your home.


The Importance of HOA Assessments

As a homeowner, you might feel that HOA assessments are unnecessary when there are already monthly dues to cover the association’s expenses. But, as in life, many things can go wrong in an HOA community. The board can make budgeting mistakes or unexpected costs might arise. And special assessments allow HOAs to source funds when the going gets tough.

Stay on top of your association’s dues and assessments with the help of Condo Manager’s state-of-the-art management software. We make dues and assessment payments a breeze for any size HOA. Give us a call at (800) 626-1267 or reach out to us online for a free demo.