Navigating Homeowners Association Fees: Strategies for Financial Advisors and Tax Professionals

As homeowners associations continue to grow in popularity, financial advisors and tax professionals are facing a surge in questions about how to navigate the hefty fees associated with these communities. With costs often running into the hundreds of dollars per month, homeowners are looking for strategies to manage these expenses effectively.

According to a recent analysis by Bankrate, the fees on top of mortgage payments, property taxes, and other homeownership expenses can add up quickly, depending on factors like inflation, location, and the amenities offered by the association. Self-employed business owners who rent out their residence or use it as their office may qualify for deductions from income taxes, providing some relief from the financial burden.

Jack Oujo of Oujo Wealth Strategies advises homeowners to carefully consider where their money is going and what services they are paying for when evaluating their homeowners association fees. He emphasizes the importance of reviewing financial statements and documents to ensure transparency and accountability within the association.

The Foundation for Community Association Research reports that the number of residents living in community associations has skyrocketed in recent years, with assessments totaling $108.8 billion in 2023. These assessments fund essential services such as management, utilities, security, maintenance, and amenities like pools and clubhouses.

While homeowners association fees are generally not tax-deductible for those using the property as their main residence, there are exceptions for rentals and business usage. Liting Chuang of Bordeaux Wealth Advisors explains that HOA dues paid on rental properties or properties used for business purposes can be deducted as rental or business expenses, providing some relief for homeowners in these situations.

As the tax landscape continues to evolve, homeowners are advised to stay informed about potential deductions and strategies for managing homeowners association fees. With careful planning and consideration, homeowners can navigate these expenses effectively and ensure they are getting the most value out of their association memberships.