Is my Homeowner's Association Required to File a Tax Return?

QUESTION OF THE MONTH: JULY 2019

Even if a homeowner association (HOA) has a nonprofit intent, it is required to file an income tax return. If the organization has not applied for tax-exempt status with the federal and state governments, it most likely qualifies to file as a for-profit corporation with Form 1120-H.

On Form 1120-H, a homeowners association elects to take advantage of the tax benefits provided by section 528 by filing a properly completed Form 1120-H. The election is made separately for each tax year and generally must be made by the due date, including extensions, of the income tax return. The tax benefits of section 528 include the exemption of income related to functions of the HOA such as membership dues and assessments.

Non-exempt income - such as payments from nonmembers or members payments for transportation - is taxable at a 30% tax rate (32% for timeshare associations).

The HOA will also need to resolve any state filing issues. For more information, see Form 1120-H instructions here.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisers before engaging in any transaction.