Q: I am a new homeowner. I purchased a condo townhouse last year with money from an inheritance, so I am lucky that I have no mortgage.
I filed for a homestead exemption with my county. What all does this do for me? I just want to know more about how this works.
Also, can I deduct my Homeowners Association fees from my income taxes? I pay $272 a month to my HOA and that’s about an eighth of my take-home pay.
A: Congratulations on becoming a homeowner. It’s a good time to buy a house for some – if you can afford it and you can qualify for a loan (not an issue for you).
The homestead exemption helps reduces your overall property tax bill. So, it’s a good idea to file for it. In some states, senior citizens often pick up an even bigger reduction in real estate taxes, so keep that in mind once you hit the minimum age (which varies from state-to-state).
But for the particulars of any homestead exemption in your county, you should place a call to the tax office there. Most counties also have websites and those sites often explain how homestead exemptions work.
Unfortunately, you cannot write off your homeowners’ association fees or dues on your taxes. I know that’s a big expense, but the only things you can write off on your taxes are the interest you pay on your mortgage or home equity line of credit and your real estate property taxes.
And, you can only write off these expenses if you itemize on your federal income tax return. More than two-thirds of Americans take the standard deduction, so they wouldn’t be able to take these deductions at all.