If you’ve purchased a vacation condo, you’re likely paying an HomeOwner’s Association (HOA) fee. While HOA fees aren’t tax deductible for your primary residence, HOA fees can be tax deductible as an expense if your property is used for rental.
So while it depends on your circumstances and the HOA, we’ve explored deductibles for a vacation home you use and also rent out.
Recap on HOAs
When buying a condo or an individual property within a residential community, you’ll need to join and contribute to the HOA. These governing bodies exist to ensure all of the shared amenities are maintained, repaired when necessary and that all homeowners contribute to taking care of the common areas of the property.
You’ll be required to pay fees that cover this and, as all of the homeowners pay into the HOA, reserve funds will accumulate over time. For more information on the rules of HOAs and if they apply to you, bookmark this blog.
Tax Deductible Fees for a Vacation Home
When your condo is both an enjoyable retreat and a potential rental property, the rules are different. You can still deduct HOA fees, but only for the time the property is used as a rental. On your Schedule E, the IRS allows you to write off all of your "ordinary and necessary" expenses. Since you're required to pay your condo fees, they can be classed as necessary.
Say you occupy the condo through summer and rent it out the rest of the year. In this case, you could deduct the rest of the HOA fees because you use it as a rental whenever you aren’t in residence.
It’s important to note that special assessments for improvements of the property aren't tax-deductible. Special assessments are typically charged by the HOA to cover unforeseen maintenance or emergencies, like roof repairs.
So, if the special assessment is used for those repairs, it’s normally tax deductible. But if it’s for improvements, it’s nondeductible.
If you have a home or condo you rent out to tenants, be sure to fill out a Schedule E form when completing your taxes each year. When in doubt, it's best to consult with an accountant.
Tax Deductible HOA Fees in Action
At Bermudiana Beach Resort, the latest subtropical addition to Hilton’s Tapestry Collection, owner use is typically capped at 90 days per year. The operating company featured at the hotel condominium then markets the remaining 275 days (and any other days you don’t use) to its database for rental.
A major perk is the operating company won't restrict you to weekly rentals (e.g. Saturday to Saturday). You can stay for as few or as many days as you wish, arriving on whatever day of the week suits your lifestyle. This also applies to your rental guests, which increases the number of guests wanting to occupy your property. In turn, this increases the income you can potentially incur from it.
Fees, tax and the defined advantages of having an HOA are just some things you might want to know more about. It’s essential to know how they operate alongside ownership of a condo, particularly if you’re in a hotel condominium. That's why we’ve created a resource covering just that.
Explore More About HOA and Hotel Condominium Ownership
Taxes can be stressful. So why not relax in resort property you own in a spectacular vacation destination? We’ve created a visual guide for everything you need to know about owning a condo in a hotel condominium resort, from HOA to how the hotel condominium model weighs up against fractional ownership or renting out your vacation home yourself.
It shows how hotel condominiums make vacation home ownership a breeze. You'll learn about their relationship with prestigious hospitality giants like Hilton, how they can make great rental properties and more.
Click below to get access and start your journey.
