Eligibility
Available to condominium management, residential real estate, or timeshare associations where 60% of income is from dues/fees and 90% of expenses are for association property maintenance.
Frequently Asked Questions
Who is eligible for the Homeowners Association Tax Election?
Available to condominium management, residential real estate, or timeshare associations where 60% of income is from dues/fees and 90% of expenses are for association property maintenance.
How does the Homeowners Association Tax Election work?
Allows HOAs to elect to be treated as tax-exempt organizations, whereby membership dues, fees, and assessments (exempt function income) are excluded from gross income.
What law authorizes the Homeowners Association Tax Election?
The Homeowners Association Tax Election is authorized under IRC §528 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §528
Source: Internal Revenue Code, Title 26, United States Code
§ 528. Certain homeowners associations(a) General ruleA homeowners association (as defined in subsection (c)) shall be subject to taxation under this subtitle only to the extent provided in this section. A homeowners association shall be considered an organization exempt from income taxes for the purpose of any law which refers to organizations exempt from income taxes.
(b) Tax imposedA tax is hereby imposed for each taxable year on the homeowners association taxable income of every homeowners association. Such tax shall be equal to 30 percent of the homeowners association taxable income (32 percent of such income in the case of a timeshare association).
(c) Homeowners association definedFor purposes of this section—(1) Homeowners associationThe term “homeowners association” means an organization which is a condominium management association, a residential real estate management association, or a timeshare association if—(A) such organization is organized and operated to provide for the acquisition, construction, management, maintenance, and care of association property,
(B) 60 percent or more of the gross income of such organization for the taxable year consists solely of amounts received as membership dues, fees, or assessments from—(i) owners of residential units in the case of a condominium management association,
(ii) owners of residences or residential lots in the case of a residential real estate management association, or
(iii) owners of timeshare rights to use, or timeshare ownership interests in, association property in the case of a timeshare association,
(C) 90 percent or more of the expenditures of the organization for the taxable year are expenditures for the acquisition, construction, management, maintenance, and care of association property and, in the case of a timeshare association, for activities provided to or on behalf of members of the association,
(D) no part of the net earnings of such organization inures (other than by acquiring, constructing, or providing management, maintenance, and care of association property, and other than by a rebate of excess membership dues, fees, or assessments) to the benefit of any private shareholder or individual, and
(E) such organization elects (at such time and in such manner as the Secretary by regulations prescribes) to have this section apply for the taxable year.
(2) Condominium management associationThe term “condominium management association” means any organization meeting the requirement of subparagraph (A) of paragraph (1) with respect to a condominium project substantially all of the units of which are used by individuals for residences.
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