HOA assessments tax deduction

Summary#

A-5691 would add a New Jersey gross income tax deduction for certain homeowners association (HOA) assessments paid for a taxpayer’s principal residence. It supplements Title 54A, the State’s gross income tax law; the stated goal is to provide a deduction for these payments. The bill is introduced and is not law.

  • A taxpayer could deduct the amount paid during the tax year for qualifying assessments. This is a deduction from gross income, not a tax credit for the same dollar amount.
  • Qualifying associations must be located in New Jersey and exclude timeshare associations. The assessment must relate to the taxpayer’s principal residence.
  • An HOA receiving qualifying assessments would have to report each payer’s identifying information and payment amount to the Division of Taxation, and provide that individual a written statement.
  • The bill would apply to tax years beginning on or after enactment.

What it means for you#

  • Homeowners who pay HOA assessments: If the bill became law, you could deduct qualifying payments for your principal residence. The bill does not state a dollar cap or income limit.
  • HOAs: An association receiving qualifying assessments would have to file an information return in the form and manner, and at the time, set by the Director of the Division of Taxation. It would also have to give each reported payer a written statement with the association’s information contact details and the information reported about that payer.
  • Other taxpayers: The bill does not directly change tax rules for people who do not pay qualifying assessments.

Money#

No public cost estimate is included in the supplied material. No publicly available information.

  • The deduction could reduce gross income subject to New Jersey gross income tax for eligible taxpayers; the bill gives no estimate of the resulting revenue reduction.
  • HOAs would have to collect and report payment information and send statements. The bill does not estimate those costs.

What is unclear#

  • The bill does not explain how the deduction would be claimed or what records taxpayers would need.
  • It leaves the reporting deadline, form, and manner to the Division of Taxation.
  • The definition describes assessments as “regularly occurring” and “mandatory,” but also includes special assessments. It is unclear how a special assessment that is not regularly recurring would qualify.
  • The supplied material does not include Title 54A or other current-law materials, so it is not possible to verify whether current law already provides a similar deduction.
  • The bill does not say how this deduction would interact with other tax deductions or benefits.

Case for#

  • The bill appears intended to give tax relief to homeowners who must pay HOA assessments for their principal residence.
  • A possible argument for the bill is that HOA assessments can pay for shared services and common areas, including some services described in the bill’s statement as similar to municipal services.
  • Requiring HOAs to report payments could give taxpayers and the Division of Taxation records of the amounts claimed.

Case against#

  • The bill does not cap the deduction or limit it by income, so the amount of tax relief could vary with the size of qualifying assessments.
  • The unclear treatment of special assessments could lead to different views about which payments qualify.
  • The bill requires reporting but does not set the operating details or estimate the cost for HOAs or the State.
  • Without an estimate of the revenue reduction, the public cost of the deduction is unknown.