Homeowners association tax return

What is a homeowners association tax return?

Because HOAs are usually set up as not-for-profit entities, a homeowners association tax return most often consists of IRS Form 1120-H. The qualifications to file this form are as follows:

• At least 60% of gross income must be exempt function income (broadly, funds used to pay principal, interest, taxes, and maintenance on HOA property and for community wide trash removal)
• At least 90% of expenses must be to acquire, build, manage, maintain, and care for its property
• No private individual can profit from the association’s net earnings except by providing services or by a general rebate of excess collections.

Why is a homeowners association tax return important in an HOA?

A homeowners association tax return is required by the IRS. An accountant’s advice on how to file may be needed if any of the above qualifications for Form 1120-H is not met.

Form 1120-H enables HOAs to exclude from their gross income declaration the above-mentioned “exempt function income,” potentially saving substantial amounts over a conventional corporate tax return, wherein taxes might be declared payable on those funds.

How can you use “homeowners association tax return” in a sentence?

I barely file my own tax return in time and now they expect me to file a homeowners association tax return, too?