DEAR BOB: Are the homeowner association dues I pay every month tax deductible? – Robert R.
DEAR ROBERT: The answer depends on your situation. If you are an owner-occupant residing in your residence, such as a condominium or townhouse, your monthly homeowner association dues are non-deductible personal expenses.
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However, if you rent the residence to tenants, then the monthly homeowner association dues are tax-deductible “ordinary and necessary” expenses. You should report those dues payments on Schedule E of your income tax returns, the same place you report the rental income received. For more details, please consult your tax adviser.
GETTING NAMES OFF TITLE IS EASY; GETTING NAMES OFF THE MORTGAGE IS IMPOSSIBLE
DEAR BOB: Five years ago, my husband and I signed for a mortgage so our son and daughter-in-law could buy a house in upstate New York. They had bad credit. Money was not involved. He paid the down payment and continues to pay the mortgage and property taxes. Now we would like to remove our names. I don’t think they can qualify for their own mortgage and we cannot afford to pay it off. What should we do? – Terry U.
DEAR TERRY: Getting your names off the title to the house is easy. All you do is execute a quit claim deed to your son and daughter-in-law. Then record it in the county or city where the house is located.
However, getting your names off the mortgage is virtually impossible. Mortgage lenders are extremely reluctant to release co-borrowers from the mortgage note.
The reason is, in the event of default, depending on the type of mortgage and state law, if a foreclosure loss results, the lender might be able to obtain a deficiency judgment against you. More details are available from a real estate attorney where the property is located.
THREE POSSIBLE TAX SITUATIONS FOR VACATION HOMES
DEAR BOB: We recently bought a condo on Maui. Can you recommend any book that will clarify the tax situation for our personal and rental use of the condo? – Peter B.
DEAR PETER: There are four possible tax situations: (1) no personal use time, (2) under 14 days of annual personal use, (3) annual personal use over 14 days or 10 percent of the rental days, and (4) annual personal use under 15 days or 10 percent of the rental days.
Second or vacation homes generally are not great tax shelters whether or not you rent to tenants for part of the year. But they can provide tax deductions to shelter the rental income from taxation. More details are in my special report, “2004 Realty Tax Tips: Eight Chapters of Tax Savings for Homeowners and Realty Investors,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com. Questions for this column are welcome at either address.
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