Yes, Homeowner Associations (“HOAs") must file a tax return every year.
To qualify as an HOA, 60% of revenues and 90% of expenses must relate to the management and maintenance of the properties. Any income that is not from members (i.e., fees charged for guest useage, bingo games, advertising revenues) is taxed at 30%.
Income from members for maintenance and management is exempt.
HOAs do have a choice of filing, which can change year-to-year:
- A Form 1120H (member income and expenses are tax exempt. non-member income, net, is taxed at 30%).OR
- A Form 1120 (all net income is taxable at corporate rates (21%)).
If an Association has member revenue only, a Form 1120H makes sense. If there is a lot of non-member revenue, then a Form 1120 may have a lower tax rate (21%) vs. the non-member 1120H rate of 30%.
If your HOA board has questions about their tax filing requirements and options, please contact a ShindelRock tax professional.
Written by: David Shindel
