One of the major benefits of homeownership is that you can offset long-term taxes from property gains simply by maintaining your property. The industry term for this is cost basis—it refers to the original price you paid for your home, plus the value of improvements you’ve made along the way. Did you install a new roof? Remodel your kitchen? The more improvements you’ve made, the more write-offs you can claim, and the lower your taxes will be. Think of it as your reward for making a long-term investment in the health of your property.Most single-family homeowners collect on this benefit. If you are part of an association, though, you probably aren’t. The reason: Co-ownership. Your individual home value is only a single part of the valuation process. The rest is up to your HOA.
How co-ownership depletes your tax benefit
Each homeowner in an association “owns” a share of the entire property. This is co-ownership. As a co-owner, the total value of your home is partially determined by the value of the entire property.
Home Value = Dwelling Value + Co-Owned Common Property Value
You INDIVIDUALLY OWN a share of the entire property
HOAs are corporations. They do not share in co-ownership, and their priorities are different than a homeowner’s. Their primary responsibility is long-term maintenance of the property, and this is what they spend money on — the same money you paid in dues to make home improvements.In the end, the value you add to your property with contributions is diverted by HOAs towards common property expenditures. But, doesn’t end up back in your pocket, where we think it belongs. Owners in HOAs lose out on tax benefits enjoyed by homeowners who are not part of associations.
Home Value = Dwelling Value + Co-Owned Common Property Value
You INDIVIDUALLY OWN a share of the entire property
The HOA DOES NOT OWN property and you lose benefits and value
To Summarize
The money you invest to ensure your property’s long-term value is not under your direct control. The HOA channels it into long-term costs.
