Cohousing-L Mailing List: Re: tax exempt status for HOAs

[Ken Lewis (kenlewisjr]

David Clements wrote:

> Many HOA's decide to file form 1120H.  

That's what we did for federal.

>  However, they pay 30% federal tax on  income from
> investments.  Our accountant has advised us to elect 1120H  status, and to
> invest only
> in a municipal bond fund, which is  totally federal tax-exempt and is
> state tax
> exempt to the extent that  income comes from our state (NC).  The muni
> bond
> fund pays 3-5%  roughly.  However, it is not insured, and we are
> considering a
> change to  regular CD's, which would be insured, but for which the
> effective
> interest rate  would be reduced by the 30% tax.  We have ended up with
> only a
> small tax  bill most years.

I like the municipal bond idea as a way of avoiding tax on investments.
Hmm... I'll have to think about / look into that one.

Thanks for the info.

Ken