Condo Special Assessment Decision

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I have a condo that is a rental property in WA state. I have an upcoming special assessment of $35K.

I know I can write off my assessments, and the answer may be dependent on my tax situation.

I can pay off the entire amount in 2016 or I can be charged an extra monthly assessment of $300 for 15 years.

If I pay off the entire amount then the entire amount is a write off in 2016?? Can this be spread out in future years??

If I pay a monthly assessment, is only the amount I pay each year the amount I can write off, or does the full $35K become a write off no matter if I pay over 15 years??

Does this make sense?? Assume I have the cash to pay off the entire amount.

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DocEvil said:   I have a condo that is a rental property in WA state. I have an upcoming special assessment of $35K.

I know I can write off my assessments, and the answer may be dependent on my tax situation.

I can pay off the entire amount in 2016 or I can be charged an extra monthly assessment of $300 for 15 years.

If I pay off the entire amount then the entire amount is a write off in 2016?? Can this be spread out in future years??

If I pay a monthly assessment, is only the amount I pay each year the amount I can write off, or does the full $35K become a write off no matter if I pay over 15 years??

Does this make sense?? Assume I have the cash to pay off the entire amount.

  I dont know the tax angle. But 35k/15/12 = $194.44. So there is certainly a significant "interest" charged to pay it over 15 years. I think it works out to ~6% APR.
On the other hand, if you pay it upfront, it is unlikely you can recoup that fully in case you sell this property within the next few years.

fwuser12 said:   
DocEvil said:   I have a condo that is a rental property in WA state. I have an upcoming special assessment of $35K.

I know I can write off my assessments, and the answer may be dependent on my tax situation.

I can pay off the entire amount in 2016 or I can be charged an extra monthly assessment of $300 for 15 years.

If I pay off the entire amount then the entire amount is a write off in 2016?? Can this be spread out in future years??

If I pay a monthly assessment, is only the amount I pay each year the amount I can write off, or does the full $35K become a write off no matter if I pay over 15 years??

Does this make sense?? Assume I have the cash to pay off the entire amount.

  I dont know the tax angle. But 35k/15/12 = $194.44. So there is certainly a significant "interest" charged to pay it over 15 years. I think it works out to ~6% APR.
On the other hand, if you pay it upfront, it is unlikely you can recoup that fully in case you sell this property within the next few years.

  One other thing to keep in mind. If you do sell it down the road and took the monthly payment option, in most cases, you will need to pay it off before someone buys it, or reduce the sales price by the amount still owed on the assessment. 

DocEvil said:   I have a condo that is a rental property in WA state. I have an upcoming special assessment of $35K.$35,000 assessment on a single unit ? WTF is it for ?

xoneinax said:   
DocEvil said:   I have a condo that is a rental property in WA state. I have an upcoming special assessment of $35K.
$35,000 assessment on a single unit ? WTF is it for ?

Not uncommon at all. My uncle has had multiple assessments in his building. All of the decks were rotten and had to be replaced. That costs a lot of money, especially if the reserves are somewhat low to begin with. 

Also, looked at a condo once with an upcoming 17K per unit assessment for wiring problems. 

tennis8363 said:   
xoneinax said:   
DocEvil said:   I have a condo that is a rental property in WA state. I have an upcoming special assessment of $35K.
$35,000 assessment on a single unit ? WTF is it for ?

Not uncommon at all. My uncle has had multiple assessments in his building. All of the decks were rotten and had to be replaced. That costs a lot of money, especially if the reserves are somewhat low to begin with. 

Also, looked at a condo once with an upcoming 17K per unit assessment for wiring problems. 

 Around here when the 40 year old building-wide HVAC system goes, people get assessments in that range.

Doesn't your insurance policy cover special assessments?

Yeah I'm not so sure you can just "write off" your assessments.

What is the assesment for exactly? That may matter.

There's this ...

https://www.irs.gov/publications/p527/ch04.html#en_US_2014_publi...

"You cannot deduct special assessments you pay to a condominium management corporation for improvements. However, you may be able to recover your share of the cost of any improvement by taking depreciation."


On a rental it depends on what you're really doing. Sometthing like replacing a roof is not 'maintenance' so you can't just deduct it from your income. You have to depreciate it.

I don't know how it gets figured if you pay it $300 a month though...

Reason #451 for not buying a condo.

BostonOne said:   
tennis8363 said:   
xoneinax said:   
DocEvil said:   I have a condo that is a rental property in WA state. I have an upcoming special assessment of $35K.
 

$35,000 assessment on a single unit ? WTF is it for ?
 

Not uncommon at all. My uncle has had multiple assessments in his building. All of the decks were rotten and had to be replaced. That costs a lot of money, especially if the reserves are somewhat low to begin with. 

Also, looked at a condo once with an upcoming 17K per unit assessment for wiring problems. 
 

 Around here when the 40 year old building-wide HVAC system goes, people get assessments in that range.

  
$35k for HVAC, or $17k?
Either way sounds extreme.

It might cost $20k for a ground source heat pump system in a 2500sq foot house (including the underground plumbing), but when sharing HVAC for economies of scale, how do you come up with that kind of money per unit?

taxmantoo said:   
BostonOne said:   
tennis8363 said:   
xoneinax said:   
DocEvil said:   I have a condo that is a rental property in WA state. I have an upcoming special assessment of $35K.
$35,000 assessment on a single unit ? WTF is it for ?

Not uncommon at all. My uncle has had multiple assessments in his building. All of the decks were rotten and had to be replaced. That costs a lot of money, especially if the reserves are somewhat low to begin with. 

Also, looked at a condo once with an upcoming 17K per unit assessment for wiring problems. 

 Around here when the 40 year old building-wide HVAC system goes, people get assessments in that range.

  
$35k for HVAC, or $17k?
Either way sounds extreme.

It might cost $20k for a ground source heat pump system in a 2500sq foot house (including the underground plumbing), but when sharing HVAC for economies of scale, how do you come up with that kind of money per unit?

  http://boston.curbed.com/2012/9/12/10330310/buildings-known-for-... 

"In 2006, Brookline's largest condominium complex, the 763-unit Brook House, announced a $38 million assessment. At roughly $50,000 a unit, the assessment amount rivaled (and still does) the median annual household income in the U.S. The funds from the assessment were used to replace the aging fan-coil heating system."

And for a different condo complex - 
"In 2007, another $75 million assessment was necessary to do emergency work to the HVAC systems and corroded pipes. This assessment averaged out to around $120K a unit, an amount which was more than what some owners had paid to buy their condos."

etc

taxmantoo said:   $35k for HVAC, or $17k?
Either way sounds extreme.

It might cost $20k for a ground source heat pump system in a 2500sq foot house (including the underground plumbing), but when sharing HVAC for economies of scale, how do you come up with that kind of money per unit?

  Ah, see, that's because the owner of a single-family home is getting multiple quotes, cross-shopping, and doing their homework before paying a cent, since it's their money.

The condo association hires one of the board members' cousins, because "sure he charges a fortune, but he does good work!"

I have a similar situation (rental condo) and got hit with an assessment for $4k to repave the complex. Don't know what I'd do with a $35k assessment though, that really sucks.

Anyway, I reviewed the IRS documentation on this and believe that improvements add to the underlying basis of the property, while repair-based assessments can be deducted.
Assessments for items which tend to increase the value of property, such as streets and sidewalks, must be added to the basis of the property. For example, if your city installs curbing on the street in front of your house, and assesses you and your neighbors for its cost, you must add the assessment to the basis of your property. Also add the cost of legal fees paid to obtain a decrease in an assessment levied against property to pay for local improvements. You cannot deduct these items as taxes or depreciate them.
However, you can deduct assessments for the purpose of maintenance or repairs or for the purpose of meeting interest charges related to the improvements. Do not add them to your basis in the property.

Source: https://www.irs.gov/publications/p527/ch02.html#en_US_2015_publink1000219050 

qcumber98 said:   Doesn't your insurance policy cover special assessments?
  Loss assessments under HO-6 Condo Policy have to be the result of covered losses.  Wear & tear, mechanical breakdown and deterioration are excluded so many of these assessments for condo repairs & maintenance would not likely be covered by insurance.

lonestarguy said:   Reason #451 for not buying a condo.
  Yeah because houses never have large expenses!

Jamieson22 said:   
lonestarguy said:   Reason #451 for not buying a condo.
  Yeah because houses never have large expenses!

  you will never have a 35k repair bill or assessment like a condo  

BostonOne said:   
And for a different condo complex - 
"In 2007, another $75 million assessment was necessary to do emergency work to the HVAC systems and corroded pipes. This assessment averaged out to around $120K a unit, an amount which was more than what some owners had paid to buy their condos."

etc

  Time to walk away and let the condo board foreclose.

Just out of curiosity, what's the ballpark cost to replace an in-ground pool in the current market? The condo I sold 11 months ago was built in 1984, as was the pool, which was originally intended to last 20 years. I'm wondering how much my former neighbors are going to have to pay when it finally has to be completely redone.

DTASFAB said:   Just out of curiosity, what's the ballpark cost to replace an in-ground pool in the current market? The condo I sold 11 months ago was built in 1984, as was the pool, which was originally intended to last 20 years. I'm wondering how much my former neighbors are going to have to pay when it finally has to be completely redone.
  Size matters.  Without knowing how long, wide and deep it is it is anyone's guess.

lonestarguy said:   
DTASFAB said:   Just out of curiosity, what's the ballpark cost to replace an in-ground pool in the current market? The condo I sold 11 months ago was built in 1984, as was the pool, which was originally intended to last 20 years. I'm wondering how much my former neighbors are going to have to pay when it finally has to be completely redone.
  Size matters.  Without knowing how long, wide and deep it is it is anyone's guess.

  Yes, I can confirm size does matter

alamo11 said:   lonestarguy said:   
DTASFAB said:   Just out of curiosity, what's the ballpark cost to replace an in-ground pool in the current market? The condo I sold 11 months ago was built in 1984, as was the pool, which was originally intended to last 20 years. I'm wondering how much my former neighbors are going to have to pay when it finally has to be completely redone.
  Size matters.  Without knowing how long, wide and deep it is it is anyone's guess.

  Yes, I can confirm size does matter


I happen to think deep matters more than wide.



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