Can Homeowner pay for repairs?

ThomasC11 (California)
Posts: 210

Posted:

HOA is underfunded and has prioritized spending. Tier 1 is "life threatening" issues (mold, roofs, and the like). Homeowner has an overgrown tree dropping debris on car which is parked in private/open carport space. Has submittged complaints about damage to vehicle.

Homeowner willing to pay for trimming or removal of the tree. Funds not available from HOA in the forseeable future.

Is this allowed if performed by licensed/insured vendor?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A HOA is ONLY funded by it's members for it's members. I would suggest instead re-evaluating your HOA budget and raising the funds. You all may want to do a special assessment to get all the maintenance items taken care of at once. The board may be able to raise the dues up to 5% a year to help cover costs. The last is the owners can vote amongst themselves to raise the dues more than 5% in order to get enough funds.

A homeowner may decide to do the work themselves to help out. Just make sure to have them licensed and insured if it's on common property. Don't expect to be paid back nor a reduction in your dues. If you have multiple issues, why not just organize a volunteer day and members kick in to do the work? The HOA pays the supplies and the owners provide the labor. I used to do that once or twice a year to get things straightened up.

Former HOA President

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A HOA is ONLY funded by it's members for it's members. I would suggest instead re-evaluating your HOA budget and raising the funds. You all may want to do a special assessment to get all the maintenance items taken care of at once. The board may be able to raise the dues up to 5% a year to help cover costs. The last is the owners can vote amongst themselves to raise the dues more than 5% in order to get enough funds.

A homeowner may decide to do the work themselves to help out. Just make sure to have them licensed and insured if it's on common property. Don't expect to be paid back nor a reduction in your dues. If you have multiple issues, why not just organize a volunteer day and members kick in to do the work? The HOA pays the supplies and the owners provide the labor. I used to do that once or twice a year to get things straightened up.

Former HOA President

TimB4 (Tennessee)
Posts: 21,062

Posted:

Our Board has a standing policy that if an owner wants to trim/prune a tree in the common area for things like that at their expense, we have no problem with it. If the owner wants to remove a tree at their expense, they must ask permission. So far we have had only 1 problem but that was easily resolved.

DaveD3 (Michigan)
Posts: 796

Posted:

I agree with Tim & Melissa.
We have a clean-up day every year to spruce-up what little we have in the way of common areas.

Our area has also been hit hard with Emerald Ash Borer and pretty much every Ash tree has died. So clean-up in the wooded part of our common area is entirely by volunteers looking for firewood. No issues at all.

I would ask that they seek permission before removing a tree though.

Frankly, if I was the homeowner and nothing was done, I'd be asking for forgiveness rather than permission anyhow.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By TimB4 on 05/14/2013 8:49 PM
Our Board has a standing policy that if an owner wants to trim/prune a tree in the common area for things like that at their expense, we have no problem with it. If the owner wants to remove a tree at their expense, they must ask permission. So far we have had only 1 problem but that was easily resolved.

It's so easy to overlook the tax ramifications of what appears on the surface to be simple actions.

If a homeowner pays for trimming or removing a tree in a common area (which should be paid for by the association) the cost of that is non-exempt income to the association and must be declared as such when the association files its taxes. That cost is taxable income to the HOA (less the standard $100 deduction).

The same is true if a homeowner "donates" money to the association.

Only assessments paid by all homeowners is exempt from income tax.

DaveD3 (Michigan)
Posts: 796

Posted:

Quote:

Posted By BruceF1 on 05/15/2013 4:37 AM

Posted By TimB4 on 05/14/2013 8:49 PM
Our Board has a standing policy that if an owner wants to trim/prune a tree in the common area for things like that at their expense, we have no problem with it. If the owner wants to remove a tree at their expense, they must ask permission. So far we have had only 1 problem but that was easily resolved.

It's so easy to overlook the tax ramifications of what appears on the surface to be simple actions.

If a homeowner pays for trimming or removing a tree in a common area (which should be paid for by the association) the cost of that is non-exempt income to the association and must be declared as such when the association files its taxes. That cost is taxable income to the HOA (less the standard $100 deduction).

The same is true if a homeowner "donates" money to the association.

Only assessments paid by all homeowners is exempt from income tax.

I doubt that there are many HOAs that have such generous residents that this is actually a problem such that it must be reported. I would think of that more in terms of something that technically should be reported, but is insignificant in nature.

If someone volunteers to "have a tree trimmed/removed", I'm certainly not going to bother asking them how much they spent on doing so. Likewise if someone bought a tree and planted it in the common area. "income"? Maybe. I'll wait for the IRS to come knocking.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

> If someone volunteers to "have a tree trimmed/removed", I'm certainly not going to bother asking them how much they spent on doing so. Likewise if someone bought a tree and planted it in the common area. "income"? Maybe. I'll wait for the IRS to come knocking.

There's no "maybe" about it. You would be surprised to learn all the sources/types of income the IRS considers as taxable (publication 515).

True, most people are unaware of all the forms of income the IRS considers taxable, and others ignore income that is not reported to the IRS on W-2s, 1099s, etc., and a lot of income goes unreported. Fact is, when it is small, the IRS generally ignores it too since it is not worth their time to go after it.

But, that doesn't change the law. As a professional tax preparer, I am bound to report such income if I prepare your return and you make me aware of it. And, if I suspect such income I have to ask the question. Whether you're truthful to me or not is not my concern, just as long as I have documented the question and your answer. The risk to me by not doing so are severe penalties and the loss of my right to practice before the IRS (and my job).