Are HOA Clubhouses Property Tax Exempt?

EH (Maryland)
Posts: 10

Posted:

Hello - I have been reading discussions on this thread for a while, but this is my first post. Does anyone know if HOAs are responsible for paying property taxes on community clubhouses? The clubhouse has a modest size party room, fitness center, living room and lockers. The clubhouse is used for community meetings as well as paid rentals by residents. This is a fairly new community so we are exploring a lot of new grounds. Thanks in advance.

PitA1
Posts: 222

Posted:

in South Carolina:

YES the HOA pays property tax on common property

at a reduced rate as a 'public benefit property' or some such wording

you need to check with your county 'assessor'

EH (Maryland)
Posts: 10

Posted:

PitA1 - Thank you for your response. I am in Maryland and have tried to look up this information on the internet to no avail. Also, we recently received a tax bill with a very hefty sewer service charge that does not seem to make sense. We have a pool so perhaps it has something to do with that.

EH (Maryland)
Posts: 10

Posted:

PitA1 - Thank you for your response. I am in Maryland and have tried to look up this information on the internet to no avail. Also, we recently received a tax bill with a very hefty sewer service charge that does not seem to make sense. We have a pool so perhaps it has something to do with that.

NpS (Pennsylvania)
Posts: 4,216

Posted:

In our township, the value of common amenities like clubhouses are reflected in the market prices of the houses that are sold. Since a clubhouse never sells, there are no comps available for assessors to rely on. The assessors at your local taxing authorities (township, city, county, parish, etc) will explain to you how property taxes are calculated n your area. A phone call should get you the information you need.

Sewer is typically a fixed multiple of water consumption. Again, a phone call to the sewer authority should get you the exact formula.

Sikubali jukumu. Read all posts at your own risk.

KerryL1 (California)
Posts: 14,550

Posted:

Our sewer is about 130% of our water bill, but our HOA pays for all sewer and all water, i.e., owners pay neither (directly!) in our high rise.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

Posted By KerryL1 on 07/04/2014 8:36 AM
Our sewer is about 130% of our water bill, but our HOA pays for all sewer and all water, i.e., owners pay neither (directly!) in our high rise.

Is your pool even connected to the sewer? If the sewer is based on the water bill, I would ask for an abatement to remove all the sewer charges used to fill the pool.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

I meant to quote EH, not Kerry.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By EH on 07/04/2014 6:50 AM
Hello - I have been reading discussions on this thread for a while, but this is my first post. Does anyone know if HOAs are responsible for paying property taxes on community clubhouses? The clubhouse has a modest size party room, fitness center, living room and lockers. The clubhouse is used for community meetings as well as paid rentals by residents. This is a fairly new community so we are exploring a lot of new grounds. Thanks in advance.

It depends on where you live. In Connecticut, there are no property taxes on HOA common property, which includes the clubhouse.

You will probably need to check your state's laws regarding property taxes.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By EH on 07/04/2014 6:50 AM
Hello - I have been reading discussions on this thread for a while, but this is my first post. Does anyone know if HOAs are responsible for paying property taxes on community clubhouses? The clubhouse has a modest size party room, fitness center, living room and lockers. The clubhouse is used for community meetings as well as paid rentals by residents. This is a fairly new community so we are exploring a lot of new grounds. Thanks in advance.

I might add, though, that the income from clubhouse rentals is taxable income.

NpS (Pennsylvania)
Posts: 4,216

Posted:

I would be surprised if an abatement would be available. Irrigation systems and retaining basins rarely feed sewer systems, but the water used is typically included in the water-sewer calculation.

Sikubali jukumu. Read all posts at your own risk.

KerryL1 (California)
Posts: 14,550

Posted:

We only "rent" our community lounges to residents., Bruce. It is a fee to cover custodians' work before and after a party and it's based on the estimated # of guests, i.e, from $10 - $35. So it includes moving furniture, bringing extra folding chairs and cleaning up the kitsch and lobby restroom, vacuuming, etc., after the party. So that fee is taxable? Or not. Thanks.

PitA1
Posts: 222

Posted:

the pool really needs to be on a separate water meter so it is billed INDEPENDANTLY w/o sewer charges

in my neck of the woods the sewer charge is BASED on but is higher than the water charge

our irrigation and pool are on a separate meter which does NOT charge sewer as the water 'goes to earth'

PitA1
Posts: 222

Posted:

http://www.dat.state.md.us/sdatweb/real.html#misc

LarryB13 (Arizona)
Posts: 4,099

Posted:

EH,

Quite often the best source of information about taxes will be the association's CPA.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By LarryB13 on 07/04/2014 10:34 AM
EH,

Quite often the best source of information about taxes will be the association's CPA.

Not necessarily. I prepare taxes professionally and this year I discovered that a new client overpaid last year's taxes by $4,300 because of a mistake made by the firm that prepared last year's taxes. Two years ago my granddaughter overpaid taxes by $400 because of a mistake made by another tax firm. They itemized deductions when her standard deduction was greater.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By KerryL1 on 07/04/2014 9:26 AM
We only "rent" our community lounges to residents., Bruce. It is a fee to cover custodians' work before and after a party and it's based on the estimated # of guests, i.e, from $10 - $35. So it includes moving furniture, bringing extra folding chairs and cleaning up the kitsch and lobby restroom, vacuuming, etc., after the party. So that fee is taxable? Or not. Thanks.

It still has to be reported, although you can deduct from the income the costs associated with producing that income. If it covers expenses exactly, then it is a wash.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By KerryL1 on 07/04/2014 9:26 AM
We only "rent" our community lounges to residents., Bruce. It is a fee to cover custodians' work before and after a party and it's based on the estimated # of guests, i.e, from $10 - $35. So it includes moving furniture, bringing extra folding chairs and cleaning up the kitsch and lobby restroom, vacuuming, etc., after the party. So that fee is taxable? Or not. Thanks.

I am not an accountant, please check with a qualified tax account. In any case, here is my understanding. Dues income is tax exempt. Other income is taxable, but as far as whether you actually have to pay taxes , "it depends". Any expenses incurred in producing taxable income are deducted from gross income, the result is net income (or profit). You would need to track those expenses and include them on your 1120H (or whatever form you use).

Escaped former treasurer and director of a self managed association.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By DouglasK1 on 07/04/2014 12:31 PM
Dues income is tax exempt.

As long as you file Form 1120-H and are qualified to do so; that is, you meet the income and expenditure tests.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By EH on 07/04/2014 6:50 AM
Hello - I have been reading discussions on this thread for a while, but this is my first post. Does anyone know if HOAs are responsible for paying property taxes on community clubhouses?

I suspect that if you are, you have been being billed for those taxes from the county.

You may want to direct your question to them.

EH (Maryland)
Posts: 10

Posted:

Quote:

Posted By KerryL1 on 07/04/2014 8:36 AM
Our sewer is about 130% of our water bill, but our HOA pays for all sewer and all water, i.e., owners pay neither (directly!) in our high rise.

That is interesting. On a related note, our HOA pays the water bills as we do not have separate meters for each unit and house. However, each owner receives a hefty sewer bill when we receive our property tax bill. It seems to me that if the HOA pays for the water bills then they would also receive the sewer bill. Is the sewer bill necessarily based on water bills or could it just be a flat amount? I live in Maryland, so perhaps it is state specific.

EH (Maryland)
Posts: 10

Posted:

Quote:

Posted By PitA1 on 07/04/2014 10:12 AM
the pool really needs to be on a separate water meter so it is billed INDEPENDANTLY w/o sewer charges

in my neck of the woods the sewer charge is BASED on but is higher than the water charge

our irrigation and pool are on a separate meter which does NOT charge sewer as the water 'goes to earth'

Thank you everyone for your helpful responses!

PitA1 - That is good to know about the pool and irrigation being on separate meters. I will check but do not think that ours are. Additionally, some of the single family homes in our community have irrigation systems. However, we only have a single meter that covers all of the single family houses. We do want to explore the feasibility of cost of having individual meters installed.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By EH on 07/07/2014 7:34 PM

Posted By KerryL1 on 07/04/2014 8:36 AM
Our sewer is about 130% of our water bill, but our HOA pays for all sewer and all water, i.e., owners pay neither (directly!) in our high rise.

That is interesting. On a related note, our HOA pays the water bills as we do not have separate meters for each unit and house. However, each owner receives a hefty sewer bill when we receive our property tax bill. It seems to me that if the HOA pays for the water bills then they would also receive the sewer bill. Is the sewer bill necessarily based on water bills or could it just be a flat amount? I live in Maryland, so perhaps it is state specific.

It's fairly common when a HOA has a single meter for the sewer to be billed separately to the HOs. I doubt that there is anything state specific and I doubt that there is a "flat rate."

Sikubali jukumu. Read all posts at your own risk.