HOA Special Assessments deductible?

[Carl]

If the home was not used for business purposes (i.e.; rented out) during the time the HOA fees accumulated, they are not deductible at all, and are not reported anywhere on the tax return.

As for capital gains, if the estate sold the property, then the sale would qualify for the "lived in 2 of last five years it was owned by the resident" capital gains tax exclusion.

If the property was transferred to the named beneficiary, then the named beneficiary gets a step-up in basis. The only taxable gain would be any profit made over that stepped up basis (taking into account deductible selling expenses, of course.) Typically, if the property is sold within a reasonable time after the passing of the original owner, there is very little (if any) gain to be taxed anyway.

[Carl]

Oh yeah! On any HOA "Special Assessments", how you deal with those depends on what the special assessments were for. For example, a special assessment for a new roof on a condo complex would be a property improvement, and added to the cost basis. But even then, that special assessment has to be applied equally to all condo owners within the complex, in order for it to qualify.

[Anonymous_]

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@Carl wrote:

As for capital gains, if the estate sold the property, then the sale would qualify for the "lived in 2 of last five years it was owned by the resident" capital gains tax exclusion.

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No, the estate would not qualify for the "lived in 2 of last five years it was owned by the resident" capital gains tax exclusion. The estate would take the property at a basis which is stepped up to fair market value on the date of death. 

[Laraness]

Thank you so much. Unfortunately we received bad legal advice, and the deed was transferred to us before the sale. Also, my mother passed in mid 2020 without a will; and due to probate and selling preparations, the earliest we could sell was December 2021 (and you know what happened to the real estate market in this time). In the meantime the HOA put a lean on the property and was threatening to push us into foreclosure. So we had to sell. Ah the joys of HOAs. In the end, we had a loss as vs the FMV, but then are facing tax liability on top of that. As long as we sort it legally, that's still ok. Thank you so much for your advice - it clarifies a lot!