topic SPCIAL ASSESSMENT ON CONDO UNIT in Business & farm

I had to pay $16,830. for a special assessment on my condo. Can I deduct this?

gwenmvs — Sat, 01 Jun 2019 01:00:47 GMT

The assessment was to replace all siding, stone, railings, etc. on all buildings due to the prior owner/builder construction errors. The cost for all buildings was over $3,000,000. and we each had to pay according to our square footage. Mine was 16,830.

No. Those costs increase your cost basis (the amount you...

Opus 17 — Sat, 01 Jun 2019 01:00:47 GMT

No. Those costs increase your cost basis (the amount you have invested in the property) and that may reduce your capital gains when you sell. But it's not a deductible expense.

If you are renting the condo and reporting rental income, you depreciate the assessment over 27.5 years.

SPCIAL ASSESSMENT ON CONDO UNIT

jackiegangi — Sat, 18 Mar 2023 20:12:47 GMT

We had to pay special assessment for repairs on our condo building that totalled $7,000,000. Our share for our unit was $22,000. How is this treated for taxes?

Re: SPCIAL ASSESSMENT ON CONDO UNIT

AnnetteB6 — Sat, 18 Mar 2023 20:45:54 GMT

The previous advice given by Opus17 still holds true for a 2022 tax return.

If your condo is your primary residence and not a rental property, then the amount you had to pay for the special assessment is not deductible on your tax return. Keep the information for your records and add it to the basis of your property when or if you sell it in the future.

If you are renting the condo or renting a portion of the condo, then you would depreciate the assessment as an improvement to the property over 27.5 years, adjusted by the percent of business usage.

@jackiegangi

Re: SPCIAL ASSESSMENT ON CONDO UNIT

Opus 17 — Mon, 20 Mar 2023 15:34:08 GMT

@jackiegangi wrote:

We had to pay special assessment for repairs on our condo building that totalled $7,000,000. Our share for our unit was $22,000. How is this treated for taxes?

First, you have to distinguish between repairs and improvements. A repair restores the property to as-was condition (like patching a hole in the wall or filling potholes in the parking lot). An improvement adds value or extends the useful life of the property. Improvements might include replacing windows, or adding structural stability to an older building.

Then, you have to consider if this is your personal home or income property (a rental). Generally speaking:

	Repairs	Improvements
Personal home	No tax adjustments. Repairs are the normal responsibility of every property owner	Added to the cost basis, and may reduce your capital gains when you sell
Rental property	Deductible in the year paid against rental income	Added to the cost basis as an improvement and then depreciated

Re: SPCIAL ASSESSMENT ON CONDO UNIT

bdickie87101 — Wed, 12 Apr 2023 17:43:34 GMT

I am in a similar situation as an owner of a rental unit that was levied a special assessment - However I have a bit of a mixed cost breakdown.

Our building envelope (exterior cladding from 1962) no longer met city code requirements and had to be replaced in its entirety. Given the nature of the work, the condo board decided to take the opportunity to replace the balcony doors and windows.

I interpret this as split, the windows and doors would be an improvement and the exterior envelope would be a restorative repair.

Re: SPCIAL ASSESSMENT ON CONDO UNIT

Opus 17 — Wed, 12 Apr 2023 17:51:40 GMT

@bdickie87101 wrote:

I am in a similar situation as an owner of a rental unit that was levied a special assessment - However I have a bit of a mixed cost breakdown.

Our building envelope (exterior cladding from 1962) no longer met city code requirements and had to be replaced in its entirety. Given the nature of the work, the condo board decided to take the opportunity to replace the balcony doors and windows.

I interpret this as split, the windows and doors would be an improvement and the exterior envelope would be a restorative repair.

I would consider the replacement of the entire cladding (the exterior protection system) because of deterioration and code changes to be a classic definition of a betterment (improvement) rather than a repair. If you want to expense the cost rather than depreciating it, you may want to consult your own tax advisor.

https://www.thetaxadviser.com/issues/2021/oct/capitalized-improvements-vs-deductible-repairs.html

Re: SPCIAL ASSESSMENT ON CONDO UNIT

HopeS — Wed, 12 Apr 2023 18:03:25 GMT

It depends on whether or not you live in the condo or if it is used as a rental or partially rented property.

Per advice from @AnnetteB6 If your condo is your primary residence and not a rental property, then the amount you had to pay for the special assessment is not deductible on your tax return. Keep the information for your records and add it to the basis of your property when or if you sell it in the future.

If you are renting the condo or renting a portion of the condo, then you would depreciate the assessment as an improvement to the property over 27.5 years, adjusted by the percent of business usage.

Please leverage the information provided by Opus 17 and also the link provided below if this condo is rented.

Rental Property Depreciation

@bdickie87101