Cohousing-L Mailing List: Re: Donations to/from HOA and Federal tax (was Re: HELP MAKE COHOUSING MORE AFFORDABLE)

[Diana Carroll (dianaecarroll]

To further clarify for those who aren't their group's bookkeepers...Sharon
was making a mistake a lot of folks who aren't tax people make, which is
mistaking "exemptions" and "deductions".  Some income is "exempt" from
taxes - certain income just simply is not taxable, so you don't pay taxes
on it.  For HOAs filing 1120-H forms, condo fees are *exempt*.  You don't
pay taxes on them.  (The rules are different for those filing regular
corporate tax form, 1120 -- I believe condo fees are not exempt).

Non-exempt income is income you DO pay taxes on.  For HOAs filing 1120-H,
non-exempt income is income from any source other than condo fees....for
instances, usage fees for renting the CH, interest on reserves and so on.
 1120-H filers pay income tax ONLY on non-exempt income.

"Deductions" are amounts by which you can *reduce* your taxable
(non-exempt) income so that you pay less taxes.  You can't deduct from
exempt income, because that doesn't make sense -- you aren't paying ANY
taxes on that amount, so reducing that number is irrelevant.

Form 1120-H is kind of vague about which types of expenses can be deducted
from non-exempt income.  I was wondering if anyone had either 1) deducted
charitable contributions from non-exempt income, or 2) had filed with a
form 1120 rather than 1120-H so that they could deduct charitable
contributions.

Diana


On Fri, Nov 22, 2013 at 2:46 PM, Diana Carroll <dianaecarroll [at] 
gmail.com>wrote:

> Um...Sharon, we are talking about two entirely different things here.  I'm
> not talking about an HOA accepting donations, just making them:
> specifically to the affordable cohousing charity recently announced, to
> which this thread was a response.
>
> And I'm talking about something very specific to filing for HOAs.
>  "Non-exempt" income is that derived from sources OTHER than condo fees.
>  Condo fees are not taxable...therefore you can't deduct expenses from
> them.   You can only deducted from that non-exempt income specific types of
> expenses.  For instance, I cannot deduct the expense of mowing from
> non-exempt income.
>
> My question was aimed at those folks who actually file taxes for their
> HOAs: have you deducted charitable donations from your taxes?
>
> If it is possible to do so, then I might be interested in making a
> proposal to my group that we collectively make a contribution to the
> Affordable Cohousing group.
>
> Diana
>
>
> On Fri, Nov 22, 2013 at 2:39 PM, Sharon Villines <
> sharon [at] sharonvillines.com> wrote:
>
>>
>>
>> On Nov 22, 2013, at 1:53 PM, Diana Carroll <dianaecarroll [at] gmail.com>
>> wrote:
>>
>> > On Fri, Nov 22, 2013 at 11:04 AM, R.P. Aditya <aditya [at] grot.org> wrote:
>> >
>> >> If your HOA makes a donation to an IRS recognized (501c3 etc.)
>> >> nonprofit, then the HOA should be able to deduct it.
>> >>
>> > Thanks, but my question was how.  Special rules apply to HOAs...if they
>> > file a 1040H they only pay taxes on "non-exempt" income which does not
>> > include condo fees...and can only deduct expenses which apply
>> specifically
>> > to that income.  Which...does or does not include donations?  So the
>> > question of whether and how to deduct charitable donations is very
>> specific
>> > to Home Owners' Associations.
>>
>> Perhaps part of the confusion is around the word "exempt".
>>
>> Many kinds of income are exempt from taxes for one reason or another --
>> business expenses incurred when trying to earn money being a major one.
>>
>> Only donations to 501c3 IRS approved organizations, which exist for the
>> good of the public, are tax exempt as charitable donations. Other donations
>> are not customarily tax deductible.
>>
>> When we moved in one of our residents believed we should be tax-exempt
>> because we would demonstrate a more equitable, economically, and
>> environmentally sound housing model. We were doing something good. (Runners
>> often feel the same way.)
>>
>> If we had applied for 501c3 status, we would not have been able to own
>> our units. A 501c3 cannot exist for the profit of it's members. It's
>> mission is to serve the public interest, to serve others at no profit to
>> itself. HOA's serve owners.
>>
>> Some communities with special programs apart from the HOA do have 501c3
>> status for those programs. (I don't have examples but I remember seeing
>> them discussed here.)
>>
>> Sharon
>> ----
>> Sharon Villines
>> Takoma Village Cohousing, Washington DC
>> http://www.takomavillage.org
>>
>>
>>
>>
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>