The HOA fees can be deducted on the rental activity as an expense under the 'Other' expense category. However, an advance payment for the following year is not always currently deductible.
There's an important exception called the 12-month rule for prepaid expenses. It lets you deduct a prepaid future expense in the current year if the expense is for a right or benefit that extends no longer than the earlier of:
- 12 months, or
- until the end of the tax year after the tax year in which you made the payment.
Based on this rule, it seems you could deduct the full amount of your HOA fees.
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