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ARE HOAS TAX
EXEMPT?
Many HOAs assume "non-profit" means tax-
exempt. That's often incorrect.
Under the Internal Revenue Code (IRC) Section
528 (or sometimes
501c categories), an
HOA can claim tax-exempt status if it meets
certain criteria. For example, a majority of
income must come from member dues/
assessments, and the income must be used
for maintenance, upkeep, or management of
community property.
If the HOA qualifies and uses the correct form
(usually Form 1120-H), then "exempt function
income" is excluded from taxable income.
However, other types of income, such as
interest on reserves, rental income from
community facilities, and non-member
services, might be taxable.
So, in many cases, HOAs are not fully tax-
exempt, but they must still file returns, and
some income could be taxed.
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