Re: tax and legal issues for common house usage
From: astromezzo (astromezzomac.com)
Date: Mon, 4 Aug 2008 10:29:36 -0700 (PDT)
You would be wise to consult with a tax attorney or other tax professional
for answers to your questions.

Rob Sandelin
Sharingwood where all our tax stuff is handled by an outside professional

We did consult our tax accountant briefly about the tax issues but weren't entirely satisfied with the answer, which is why I'm asking here to find out what happens in other cohousing communities.

We currently charge for laundry and treat it as taxable. However, we then expense the maintenance and warranty costs, and replacement reserves on the washers and driers as well as estimated gas and electric usage and we usually don't end up with a profit.

That makes sense that if the item's entire use pretty much is for things we charge for, then it's easy to deduct the expenses.

As far as charging for guest rooms or common house use, when we looked into it here in California, it appeared that we would be subject to all kinds of licensing and regulatory issues. One way around that is not to charge, but to have "suggested donations." In California,
donations are not taxable, but you would need to check in your state.

We were under the impression that donations are taxable, and I thought that was federal tax... but we're filing as a condo association - I'm sure it's different if you're structured as a non-profit. it would be very useful to know if that weren't the case, we've certainly had some big discussions about donations to the community.


In general, if you go the charging route, I believe you can estimate the deductible expenses by looking at the total common house expenses and using a fraction of them corresponding to the fraction of the usage that has been rented out. To be certain, you would need professional
advice.

Larry Miller
Oak Creek Commons

Makes sense in theory, but I'd love to know where some guidelines are for how to do this to the IRS's satisfaction. For instance, if the common house has one paid event for 1 hour in the day, we can deduct 1/24th of the overall expenses? But if that event results in people turning the a/c on stronger, running more water, turning on more lights... then we have more utility costs than average for that hour, plus we use more cleaning supplies, and more wear and tear to the building than the other 23 hours of the day... etc.

Do you mean charging RESIDENTS, or charging outsiders?
FrogSong does not charge at all for laundry or guest rooms, figuring that we all pay for these facilities out of our dues already. We even bulk buy groovy unscented laundry soap for everyone to use. Do some people use more than others? Yes. But hopefully if I do more laundry than you, and you use
the guest room more than Joe, and Joe uses the workshop while I never
do...it all evens out!
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Eris Weaver, Facilitator & Group Process Consultant

At the moment we don't charge anyone anything. Several reasons came into play - what you mentioned about people drawing on different resources at different levels, the hassle of accounting for multiple small amounts of money, and the tax issues. We may not ever charge for laundry, but there may be some interest in charging for outside groups to use our common house for events.

Thanks for the responses!
-Rosemary
Rocky Hill Cohousing

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