HOA Tax Status
February 24, 2010 at 11:53 am | In General HOA Information, Homeowner Association, Information for Board Education | Leave a CommentTags: 528, association, CPA, HOA, IRS, owner association, tax exempt
You know that your HOA is non-profit or a not-for-profit entity as they don’t pay any taxes. But is it a 501-3? 4? 10c? Actually, the tax code has something entirely different for HOA’s and it falls under IRS code 528 based on information we received when we inquired with the CPA that works with HOA taxes.
With a Google search, you can find a lot of information about the Internal Revenue Code 528 which discusses what constitutes a Homeowner Association and how they qualify for “tax exempt” status under this code.
Why is this information important to know? If you serve on a Board and “rent” out portions of common elements you will want to make sure that the percentage of income made each year from the rental (or other income) falls below a specific percentage as described in the tax code. Also, you will want to ensure that the amount spent year has a specific percentage used towards the operation of the association or to the benefit of the association members. This information can also be important when setting up a bank account as an HOA wants to receive as much as possible in interest while spending as little as possible in fees.
Whenever in doubt, make sure that your Board talks with a tax professional for clarification to help stay within the IRS code 528.
by Wendy Frenzel
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