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Can anyone explain in simple terms what it means for a shareholder with regard to the tax deductibility of their yearly maintenance?
Does this mean that if the yearly maintenance on a coop is $25,000 and that at the end of the year you can deduct %50 percent off of your taxes, that you actually are paying $12,500 on your maintenance for any given year?
Assuming that your maintenance fees are just that - no storage fee, no fitness room charges, no other miscellaneous charges, etc. - yes.
That would be a hefty mortgage service, though; I believe our co-op's deductibility is closer to 34%.
Please - check with a tax advisor, which I am not, for complete information.
There are undoubtedly also articles on Habitat regarding this subject... read them, as well.
Jeff, yes interest paid on an underlying mortgage on the building is deductible just as is interest on a mortgage or co-op you may have personally. However, the largest deductible portion of your maintenance is most likely your share of the real estate taxes which are included in your maintenance. Real estate taxes can easily represent more than half of your monthly payment, depending on the size of your building's other financial obligations.
The co-op's auditors/accountants should issue a letter to the shareholders each year, detailing how much real estate tax and how much mortgage interest was paid per share of the co-op. Simple multiplication of that rate by the number of shares you own gives you the numbers you need for your income tax calculation. From that number you should deduct any tax rebates that you may have received as a co-op share owner, such as the co-op rebate, STAR, etc.
We also completed a windows replacement project in 2009 and the shareholders received the residential energy tax credit amount. We did not plan for this however it was a nice addition. A sample two bedroom unit received $71.9053 per share and with 140 shares; this generated a $1,500 tax savings.
Board Prez. is right, The co-op's auditors/accountants should issue a letter to the shareholders each year, detailing how much real estate tax and how much mortgage interest was paid per share of the co-op." You add both figures and multiply it by the number of shares. This gives you the total amount of your maintenance used to pay these two items exclusively.
To calculate the percent maintenance deduction of your unit the calculated amount in (1) is divided by your yearly maintenance. This percent is used by realtors in real estate listings to show the amount of maintenance that a potential buyer may deduct through their IRS-1040.
It also shows you how much of the total maintenance collected by a building is dedicated to pay taxes and interest. Example, a high percent, i.e., 65 or 70%, shows that the co-op dedicates the same amount of their total collections to pay real estate taxes and underlying mortgage interest and credit lines if any.
Hope this helps!
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A certain percentage of your maintenance goes toward paying mortgage costs for the co-op; that amount is tax deductible as far as tax laws permit.
The co-op should provide you with that figure.
Consult a tax advisor before proceeding.
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