TerriS6 (California)
Posts: 3,284
Posts: 3,284
Posted:
What do California HOAs do with their large budget surplus? Thanks.
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What do California HOAs do with a large budget surplus?
Started by TerriS6 • 12 replies • 182 views
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SheliaH (Indiana)
Posts: 6,964
Posts: 6,964
Posted:
I don't think the state the HOA is in makes much of a difference. The easiest thing would be to put it in reserves and perhaps hold assessments at current levels for a year or two, depending on the amount, maybe put some money in a contingency fund to pay for unexpected expenses.
There could be tax implications if you use the money to issue a refund to homeowners. Yes, I know it sounds attractive, but the IRS and your state tax department would see that as income t h at has to be declared on tax returns. Just discuss your options with your accountant and a tax advisor to see what would be the best option
There could be tax implications if you use the money to issue a refund to homeowners. Yes, I know it sounds attractive, but the IRS and your state tax department would see that as income t h at has to be declared on tax returns. Just discuss your options with your accountant and a tax advisor to see what would be the best option
If it is not right do not do it; if it is not true do not say it. Marcus Aurelius
DeanJ
Posts: 1,786
Posts: 1,786
Posted:
In Ohio, the association's board has the power to invest excess funds according to Ohio's fiduciary standards, which is usually invested as part of reserve accounts.
ElleN (Idaho)
Posts: 1,335
Posts: 1,335
Posted:
Quote:
Posted By TerriS6 on 10/02/2025 7:44 PM
What do California HOAs do with their large budget surplus?
What do California HOAs do with their large budget surplus?
Did the HOA spend less than what the yearly budget projected? So a pile of money is sitting in the HOA's bank account, not earmarked for anything this fiscal year?
If your HOA truly has "excess income" at the end of its fiscal year, and it files tax form 1120, then the law requires the excess income to either be applies to the next year's assessments or refunded to owners. In addition an owners' vote and more has to happen. See https://www.davis-stirling.com/HOME/E/Excess-Income-Resolution
JackS20 (North Carolina)
Posts: 271
Posts: 271
Posted:
In NC it's supposed to be refunded to the owners or applied to next years' dues but most of the time it's just swallowed into the HOA's bank account and no one notices or cares.
MarkM19 (Texas)
Posts: 1,459
Posts: 1,459
Posted:
Terri,
You do not mention if the reserves are fully funded. This is usually not the case so I might suggest the excess be moved into the reserves. By doing this you must understand that reserves are only to be used for fixing and replacing common area items. Once the funds go in, they can only come out for reserve fund items. The trick if funds are needed is to lower the budgeted number that goes into reserves in the event of a shortfall in the following years. The budget money is sponge able the reserve funds are not without following loan rules in Ca.
Your case is rare as most HOAs are over budget at the end of the year. Was there a dues increase recently that caused this surplus?
You do not mention if the reserves are fully funded. This is usually not the case so I might suggest the excess be moved into the reserves. By doing this you must understand that reserves are only to be used for fixing and replacing common area items. Once the funds go in, they can only come out for reserve fund items. The trick if funds are needed is to lower the budgeted number that goes into reserves in the event of a shortfall in the following years. The budget money is sponge able the reserve funds are not without following loan rules in Ca.
Your case is rare as most HOAs are over budget at the end of the year. Was there a dues increase recently that caused this surplus?
DeanJ
Posts: 1,786
Posts: 1,786
Posted:
It’s also entertaining what some homeowner think are huge values. Sure, it’s huge based on their economic scale, but not huge based as a percentage of the HOA’s budget or future liabilities.
TimB4 (Tennessee)
Posts: 21,060
Posts: 21,060
Posted:
We do a break down once a year of what your annual assessment goes toward.
I actually asked one person if the $4.00 they contributed to insurance coverage (our largest expense outside of reserves) was the issue they were concerned about on the finances.
I actually asked one person if the $4.00 they contributed to insurance coverage (our largest expense outside of reserves) was the issue they were concerned about on the finances.
SheliaH (Indiana)
Posts: 6,964
Posts: 6,964
Posted:
Quote:
Posted By TimB4 on 10/05/2025 7:56 AM
We do a break down once a year of what your annual assessment goes toward.
I actually asked one person if the $4.00 they contributed to insurance coverage (our largest expense outside of reserves) was the issue they were concerned about on the finances.
We do a break down once a year of what your annual assessment goes toward.
I actually asked one person if the $4.00 they contributed to insurance coverage (our largest expense outside of reserves) was the issue they were concerned about on the finances.
That's a great idea. I might add comparing an estimate on how much homeowners would pay if they were solely responsible for that expense. For example, if your townhouse was a single unit, how much would you pay for All the roof maintenance and replacement?
If it is not right do not do it; if it is not true do not say it. Marcus Aurelius
DeanJ
Posts: 1,786
Posts: 1,786
Posted:
Quote:
Posted By TimB4 on 10/05/2025 7:56 AM
We do a break down once a year of what your annual assessment goes toward.
I actually asked one person if the $4.00 they contributed to insurance coverage (our largest expense outside of reserves) was the issue they were concerned about on the finances.
We do a break down once a year of what your annual assessment goes toward.
I actually asked one person if the $4.00 they contributed to insurance coverage (our largest expense outside of reserves) was the issue they were concerned about on the finances.
That’s called a budget and about every HOA does one every year. The end of year report records the accuracy of your assumptions.
SusanO3 (California)
Posts: 163
Posts: 163
Posted:
REJOICE!
JackieB4 (California)
Posts: 398
Posts: 398
Posted:
Quote:
Posted By SusanO3 on 10/09/2025 12:59 PM
REJOICE!
REJOICE!
LOL- well-said!
LetA (Nevada)
Posts: 2,679
Posts: 2,679
Posted:
What to do? make sure your reserves are 100% funded.
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