If you buy a property that's part of a homeowners association, or HOA, then you'll be liable for HOA fees as long as that home is in your name. HOA fees typically cover services such as:
- Common area maintenance
- Community amenities
- Water and sewer service
- Trash removal
- Property insurance
- Common area repairs
Here, we'll walk you through the basics of HOA fees so you can decide whether you're willing to buy a home that's subject to them.
Why do HOA fees exist?
You can't have HOA fees without a homeowners association, which is essentially a governing entity that maintains and sets rules for a housing community. HOAs are common in townhome developments, though it's possible to have a standalone house and still wind up paying HOA fees. Those fees, in short, enable your HOA to maintain your housing community and, ideally, increase your home's value over time.
What do HOA fees look like?
Usually, HOA fees are paid on a monthly basis, though sometimes you can pay them quarterly or even annually. Their actual cost, however, depends on where you live and the services your fees are intended to cover.
Realtor.com reports that HOA fees typically cost $200 to $300 a month for a single-family home. That may be true in some parts of the country, but if you live in an expensive region, or you live in a housing community with multiple amenities, like a swimming pool, clubhouse, walking trails, and tennis courts, then you could easily be looking at monthly HOA fees of $1,000 or more.
The HOA dues you'll be responsible for in conjunction with owning your home will be disclosed to you up front, so there won't be any surprises -- at least not initially. But one thing you should know about HOA fees is that your board can vote to raise them to cover increasing maintenance expenses or sudden repairs. In the latter case, you'll generally be subject to a special assessment fee, which is charged to cover a near- or short-term need.
It's also common to see HOA fees rise over time because inflation makes the cost of property maintenance more expensive from year to year.
What do HOA fees pay for?
Homeowners association fees are used to pay for a wide range of expenses related to your housing community. Here's what your fees might cover:
Common area maintenance
When you own a home in an HOA, you're responsible for maintaining your specific property. But it's the HOA that pays for common area upkeep, and as such, your fees might go toward things like lawn care, snow removal, and parking lot paving. Furthermore, many HOA fees cover common area pest control, like mosquito-spraying during the warm-weather months.
Some HOA communities offer a host of amenities, like swimming pools, tennis courts, clubhouses, and play areas. Part of your HOA fee will go toward maintaining these amenities so they're kept in good shape and remain usable. Swimming pools, for example, need to be cleaned regularly, so your fee should cover the service your HOA board brings in for that purpose.
Water and sewer service
Non-HOA homeowners generally have to pay for water as well as municipal sewer service. If you're part of an HOA, your fees might cover that expense so you don't have to pay for it separately.
Depending on where you live, trash removal may not be included as part of your property taxes. As such, a portion of your HOA fees may be allocated to trash pickup, including recycling services.
When you live in a home that's part of an HOA, you're required to buy homeowners insurance for your specific property. But your community at large needs insurance to cover things like structural damage to common areas and to provide protection in case a resident or visitor is hurt in a common area, so your HOA fees help pay for that.
Common area repairs
There will most likely come a point when something in your community's common area stops functioning. For example, your fence might get wrecked in a storm or part of your playground might get flooded. Your HOA fees are designed to build in wiggle room to allow for these types of costs to be covered.
Can you deduct HOA fees on your taxes?
Clearly, paying HOA fees can be a strain on your resources. But do they at least serve as a tax break?
If you're paying those fees for a primary residence, then, unfortunately, the answer is no. But if you're paying HOA fees on a rental property, you can deduct them as an expense associated with earning that income.
Furthermore, if you're self-employed, work from home, and are eligible for a home office deduction, you can deduct the portion of your HOA fees that relate to that office. To do so, you'll need to figure out how much square footage your home office consists of relative to your entire home and deduct that amount of HOA fees, percentage-wise. In other words, if your home office takes up 10% of your home, you can deduct 10% of your HOA fees.
Are HOA fees worth the cost?
In many cases, the amount you'll pay in HOA fees will be far less than what you'd pay to maintain the exterior of a standalone home, especially when you factor in the expense associated with maintaining a lawn and dealing with the effects of inclement weather. And in some cases, paying HOA dues gives you access to amenities that would otherwise cost money. For example, if your local swimming club charges $50 a month but your housing community has a pool available to residents, that's one extra fee you won't need to pay. The same holds true if your community has an on-site gym.
Ultimately, you'll need to weigh the expense of your HOA fees against the services they offer you to determine whether they're worth paying. Remember, if you buy a home that's part of an HOA, those fees aren't optional -- you either pay them or live someplace else. If the idea of having that extra expense doesn't sit well with you and you're working with a real estate agent in your home search, ask your agent to avoid properties that are part of an HOA. That way, you'll have one less monthly expense to worry about.
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