[net.taxes] Homeowners' Dues

johnson@saturn.UUCP (Mark Scott Johnson) (03/01/84)

No, to the best of my knowledge homeowners' dues are not tax-deductible.
They are essentially prepaid maintenance expenses, which are definitely
not tax-deductible (unless, of course, you rent out the townhouse or run
a business out of it).

Some portion of the dues are generally put into capital repair and improve-
ment funds.  Altho I've never read anything about this, it seems reasonable
that some portion of your homeowners' dues (what is spent on improvements
rather than repairs) should be addable to the tax basis of your townhouse
(and thus reducing your taxable (or tax-deferrable) profit on sale).
For example, if money is spent to repave the parking lot or to add a security
gate, your share of these expenses should be addable to your tax basis.
Things such as repainting and repairing fences would NOT be the same, however,
since they are not capital improvements.

Since when you're paying the fees, you don't know what percentage will be
spent just on capital improvements, I doubt that the IRS would let you
adjust your tax basis incrementally.  When such expenses are incurred,
however, you should be able to calculate what percentage you contributed
to the work and then adjust your basis.  The rub comes, of course, when you
buy or sell.  Do you "inherit" the contribution of the previous owner or
"will" your accumulated contribution to the next owner?

I'm planning to treat homeowners' dues as outlined above.  We've had a
special assessment for a security gate, for example, which we've added to
the tax basis.  I doubt that there will be any other capital improvements
while we own the place, tho, since it is only three years old.  Have any
of you other netters stayed awake nights thinking about this?
-- 
Mark Scott Johnson
CSnet:  Johnson@HP-Labs
USENET: ...!ucbvax!hplabs!johnson