Cohousing-L Mailing List: Re: Cohousing communities and tax-exemption, 501c3

[Diana Carroll (dianaecarroll]

On Friday, June 12, 2015, Sharon Villines <sharon [at] sharonvillines.com> 
wrote:

>
> The fear of taxes and the desire to avoid them is actually not a big
> concern, however. As a condo, the income is offset by expenses so there is
> little if any profit. Until your reserves are large enough to earn
> significant earnings in interest, there will be little if any income to tax.
>

That depends.

Any income from a source other than dues (assessments) is taxable.  So, for
instance, we have a usage fee for overnight stays in the guest room, and we
request contributions when an outside group uses our common house for a
function.  These are taxable at 30% on the HOA tax form (1040h?). For us
that amounts to a few hundred a year in taxes...not enough to make a huge
difference. But it might account for more some communities.

Being a qualified non profit also has the potential to benefit individuals
in the community.  "Donations" would be tax deductible for the donated.  We
don't really have donations, but I know some communities have fund raising
efforts beyond assessments. Like, a community may request pledges from
individual households to build, say, a playground or swimming pool. It
would be hard to convince the IRS an HOA served a larger community good but
if you could, then individual contributors would see a benefit.

Diana