Hi, EmConger,
I am assuming you are talking about a co-op apartment you live in. Your capital contributions are not currently taxed at a federal level, rather they become part of the tax basis of your home and are part of calculating any gain or loss on the sale of your home (see this IRS publication "cooperative apartments" for more detail). Tax basis in a home, including shares in a co-op apartment, is the purchase price plus the cost of capital improvements. In a co-op, the starting point for an apartment’s basis is the amount paid for the shares in the corporation.
However, shareholders who use their apartments in a trade or business or to generate income, if the co-ops corporate documents permit such use, may also be entitled to depreciation and other deductions. Also, normal deductions such as your portion of property taxes and mortgage interest are available to you as with any other homeowner.
Hope this helps!
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Best,
Karen
Sorry that I wasn't clear before. I'm talking about a different kind of co-op. It's childcare and co-working combined. I'm a co-owner making capital contributions.
Will I be taxed on total contributions for the year or only the remaining balance in my capital account. How does the price of membership impact this? Thanks!
Hi, EmConger,
Thank you for that additional information. It sounds like this may be a complex area of tax law that could require a tax professional to review both the entity type and the Co-op agreement. I suggest you consider engaging a local tax professional or considering TurboTax Full Service for either personal or business taxes as the facts require). Here are some links that may assist you further:
Hope this helps!
*Please say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Best,
Karen