Home Owner and Condominium Association Services
As condominium living becomes increasingly popular, homeowners need to be aware of some special tax considerations.
Real Property Assessments
Property taxes on condo or cooperative units reflect the size of each unit and each unit owner’s share of common elements. Be sure to check your statement to make sure you’ve been assessed properly.
Increase in Cost Basis
If your condominium’s common elements are upgraded, such as new windows throughout, your share of the expense can be added to your unit’s cost basis for tax purposes. Such improvements add to the value of your unit so they increase the basis (original cost plus improvements). Effectively, you’ll have less profit when you sell and will owe less tax on capital gain if you exceed your $250,000 limit. Save your association’s annual report, which should list common element improvements and their cost per unit.
Tax Reporting
The homeowners’ association must file an income tax return to report any income, such as interest income on the association’s bank account. We can help you decide which form is most appropriate for your association.
Attestation Services
Audit, Review and Compilation Services.
Bookkeeping Services
Assistance with owner billing and financial reporting.
Capital Budgeting
Associations are now required to report to their owners annually about the expected future costs to replace the major capital elements of the association. For example, this reporting requirement would have the association estimate the remaining useful life of the roof and the estimated cost to replace it at the end of its useful life, and compute the funds that
would be required to be set aside annually to meet that funding requirement. We can assist you in meeting this reporting requirement.
Special Studies – Cost Allocations
Several of our Association clients have complex issues to fairly allocate common costs to the Association members. We find this is often true when common services are used differently among the members. For example, at one client’s, the first floor of the association was commercial businesses, including a restaurant, and the upper floors were residential units. We performed a cost allocation study for the board of directors to recommend a more fair allocation methodology for the costs of common services, such as trash collection and common utilities. We find that an outside, objective look at such divisive issues can help keep the decisions of the board of directors more palatable to the owners.
