When searching for VA approved condos, there is something to keep in mind. You’re entering into the world of HOA, a.k.a. the Homeowners Association. The benefits of such an association come with both pros and cons, but sometimes a new homeowner forgets to factor in these monthly costs. HOA fees help pay for amenities that come with condo living, such as snow removal or lawn mowing. As a resident of a condo or housing community, you delegate these upkeep duties to the HOA and so are responsible for paying an HOA fee. But as a resident, you can also lend your voice to influence how your money is spent. In this article we will take a closer look at HOA fees and how they work.
What are HOA Fees (Homeowners Association Fees)?
The HOA fee can be paid annually or monthly. The fee amount is set by the HOA and the money earned goes towards property maintenance and services, and if these costs go up, so will the fee. The fee is mandatory under an HOA, though payment methods or enforcement will vary by association.
Additionally, depending on the condominium or housing community, the monetary amount of HOA fees are going to vary. Before buying a community home or condo, you’ll want to ask your prospective HOA questions like:
- Will the fee ever increase? How often? And by how much?
- Is there a 10-year HOA fee history I can view?
- Does this HOA have a reserve fund? How large is it?
- How often are special assessments made?
- What services does the HOA fee cover?
HOA fees are out-of-pocket and should be considered seriously along with factors like rent and location before buying a community home or condo. The good news is that homeowners associations in this context are made up of the condominium residents. They’re people like you, who work and take their kids to school and likely deal with the same financial struggles you face. This being the case, as a resident, you have a voice in how the HOA fees are put to use and even how they can be reduced. If you have ideas about how your HOA can cut down on expenses and save everyone else money, speak up!
Are HOA Dues Tax Deductible?
Whether or not your HOA fee is tax deductible depends on how you’re using the property attached to it. If the property is your year-round home, the fee is not tax-deductible. This is because the IRS considers HOA fees on primary residences to be private entity assessments.
However, if you’re renting the property, the fee can be deducted, since now, in the eyes of the IRS, it’s a fee that goes towards maintaining a rental property. To list your HOA as a deductible expense, list it in the Schedule E section of your tax return.
Now let’s say the property is your second home, or a vacation home, and when you’re not using it, you decide to rent it out to other people. Whenever the property is being rented, the HOA fees are tax deductible. However, taxes apply as soon as you start living in the property.
What do HOA Fees Cover?
HOA fees usually cover maintenance of common areas and amenities shared by everyone in the condominium or housing community, such as:
- Swimming pools
- Garbage removal
- Fitness equipment
- Snow removal
- Roof and road maintenance
- Cable TV
- Concierge services
- Painting, carpeting, and other exterior/interior upkeep
- Utilities like gas, lighting, and electricity
- Security systems
- Pest control
- Landscaping and lawn mowing
- Sewage, water, and plumbing
- Heating and air conditioning
- Building insurance
- Reserve and contingency funds for emergencies
- Condo staff and professional management
Can I Lower My Monthly HOA Fee?
Yes, you can! All you have to do is keep your self informed and involved in your housing community. As a homeowners association member, you have access to some of the HOA’s financial records. You may have the right to review the association’s budget, contracts, yearly revenue, reserve fund balance, recent assessments, and any pending legal matters. To make sure you aren’t paying more than is necessary to the association, familiarize yourselves with these documents. Take it a step further and join your local homeowners association board; this will give you power to make serious changes where they are needed and save yourself and other residents lots of money. You can help cut costs, evaluate insurance premiums, sift out essential maintenance from non-essential maintenance, and even reduce the amount of reserves if necessary.
HOA dues are just one of them any things you’ll want to consider when looking to purchase a home. To choose the best possible course for you and your family, sit down with a professional you trust and let them help you make educated decisions. Our loan officers at Low VA Rates are anxious to help you save money on decent, affordable homes.