special assessment credit during escrow

garys_lucyl — Thu, 05 Jun 2025 03:38:13 GMT

I own a property that is a rental that I have rented for 10 years. Due to negligent maintenance by the prior HOA board and management companies a new board has been surveying the state of the complex, getting new reserve studies, etc. For all the deferred maintenance work that was neglected and now sorely needed, there is now a special assessment proposed of $46K per unit to be paid over 8 years. Since it is being used for maintenance and repairs is it deductible on my schedule E along with the regular HOA payments? Some line items in this huge list of items include replacing gym equipment and pool furniture that have deteriorated. According to some other posts I read if for example the assessment were JUST for those kinds of items that is a capital improvement and would need to depreciated over 27.5 years? Would I need to request the board publish exactly what was spent during a calendar year so I know what I can deduct and what must be depreciated against my basis?

I am considering selling the property and I have read that sometimes the seller (ME) can be asked to give the buyer a credit from the proceeds towards some or all of the special assessment that remains to be levied. If that is paid during escrow when I report the sale can the credit given to the seller be deducted from the proceeds in order to reduce the net proceeds for capital gains calculations?

Re: special assessment credit during escrow

JotikaT2 — Wed, 11 Jun 2025 23:29:14 GMT

Asking the board to break out the costs between depreciable assets versus actual maintenance and repair expenses would be beneficial for full disclosure. You can refer to this link which breaks out which items would be considered capital improvements that would need to be depreciated. Any costs for routine maintenance and minor repairs can be expensed as incurred.

As far as the credits being provided by the seller to the buyer, that would be something that would need to be discussed with your realtor and lender to ensure you are in compliance with the real estate rules. Please see terminology tips in this link for more details on how your gain would be calculated.

topic special assessment credit during escrow in Business & farm

special assessment credit during escrow

Re: special assessment credit during escrow