Owning a home can generate extra income tax deductions when you file your federal tax return because of costs like mortgage interest and real estate taxes. Some of these deductions even extend to a second house, so even a vacation home can help reduce your tax liabilities for the year. Besides real estate taxes, you may be required to pay homeowners association fees for things like landscaping, snow removal or other community costs. However, HOA fees don’t meet any of the categories for deductible expenses for a primary residence, but depending on how you use your second home, your HOA dues could be used to offset your rental income for the year.
TL;DR (Too Long; Didn't Read)
HOA fees aren’t tax deductible unless your second home is a rental.
Are Homeowners Association Fees Tax Deductible?
If you only use your second home for personal use, you’re not allowed to claim a tax deduction for HOA fees. Though the HOA dues may feel like a tax, HOA fees are paid to your homeowners association rather than to a state or local government, so you can’t include them as a tax deduction.
HOA Dues Tax Deductible for Rental
An exception to the general rule is if you use your second home as a rental property. Unlike a home you use only for yourself, when you have a rental property you are allowed to write off business expenses on Schedule E. HOA fees qualify as a deductible business expense for rental properties. If you rent out your second home, you must prorate the HOA expenses between the time you use the home for personal use and the time you rent it out. For example, if you pay $1,500 in HOA dues during the year and you rent out your second home for half of the year, you can deduct $750 against your rental income.
2018 Tax Laws
Because HOA fees are not deductible as a state or local tax, the new $10,000 limitation on state and local income taxes doesn’t affect the deductibility of HOA fees. There isn’t a limit on the amount of HOA fees you can deduct as a rental expense on Schedule E to offset your rental income.
2017 Tax Laws
The tax laws in effect for 2017 for deducting HOA fees are the same as for 2018. You are only allowed to write off the HOA fees that are related to using your home as a rental. If you don’t rent out your second home, you can’t deduct your HOA fees.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."