A bridge made of two 5' diameter logs after 25 years needed replacing on a road servicing one half of the homeowners in an HOA. The groups split on replacement cost. ie, We don't use it why should we pay for replacement. The judge issued a stipulated judgement requiring all property owners to pay an equal share, approximately $9,000 as settlement payment. Is this deductible? Thanks
On Fri, 27 Mar 2015 20:48:08 EDT, J W C wrote in
I'm not a tax pro, but my guess is that it is added to the cost basis of the home.
I can't think of any reason that it would be deductible.
--- if it was on your personal residence it wouldn't be deductible as costs of maintaining a personal residence are not deductible.
--- the fact that a personal residence is part of a homeowner's association doesn't change that rule.
--- it's not a real estate tax as an HOA is not a governmental entity.
--- even if it was a governmental entity, assessments by Governments for local benefits or special improvements are not deductible.
--- if caused by 25 years of use, it wouldn't qualify as a casualty loss.
I can't think of any other possible deductions that might apply. It sounds to me, also, like an addition to the cost of the home.
Unless it is a rental property.
Unless it is a rental property. =======I disagree. For a rental, it's still looks like a capital expense (if at all realized).
I still have a problem that the ultimate structure is on the HOA's common lands, so it's really HOA property and not really capitalizable to the members' properties.
The homeowner is an owner of HOA property, and is legally obligated to contribute to HOA costs, which maintain the value of the owner's individual unit. I don't see any reason why the individual homeowners would not be allowed to add to their basis for capital improvements they paid for, that improved common property.
It may or may not be a capital expense, I would need to see more details. And if it is a capital expense, for a rental property that would lead to a depreciation deduction.
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