8
7. How do you plan and budget for a reserve fund?
Performing a reserve study is the best way to plan and budget a reserve fund. These
studies will give you an overview, plan for how much needs to be saved and how long
it should take.
Typically, a predetermined percentage of yearly or monthly assessments will go
towards the funding of a reserve account—usually between 25% and 40%. How much
money your association puts aside can change as reserves become fully funded, and
the needs of your community change. Be sure your association is on track to meet its
reserve goals and be careful to ensure owners are never paying too much or too little.
If your community is facing a potential shortfall in your reserve funds, then
adjustments can be made. Your board should work closely with your accountant,
community manager, and a certified reserve fund study specialist to find a proper
resolution.
8. Are HOA reserve funds taxable?
No, in almost all cases, any money saved in an HOA reserve fund can't be taxed. The
exception would be any interest or money earned from reserve account funds. To be
certain, check with your association accountant and local and state laws regarding
reserve funds.
