Are HOA Fees Tax Deductible In California for Your Home or Rental Property?

Homeownership in California costs HOA fees, and many homeowners question, "Are HOA fees tax-deductible in California? The short answer is: generally, no, for your primary residence, you can’t deduct them. But yes, there are exceptions, especially if the property is used for rental, investment, or part of it is used for business (home office).

Living in your home year-round and paying HOA dues, maintenance charges, and reserve fund amounts counts as a personal expense. Both California and IRS rules see it this way, so you cannot claim them as deductions. The picture shifts when the property is rented or if one section is used only for business. Under those situations, a share of the fees may be deducted.

This post is about when HOA fees can be deducted under IRS and California state rules, what qualifies (and what doesn’t), and how to claim them for rental properties or home offices properly, so you can make sure you’re not paying more tax than you have to.

What Are HOA Fees?

HOA laws in California (under the Davis-Stirling Act) set out what HOAs can enforce and how fees are collected. Homeowners in these communities are required to pay monthly or quarterly fees. HOA fees typically cover things like

• Common area maintenance (landscaping, cleaning, security, pest control

• Amenities such as gyms, pools, or clubhouses

• Reserve fund contributions for future repairs (like roof replacement or elevator maintenance)

• Special assessments for unexpected or large projects

There can also be special assessments, one-time charges imposed when something major arises and the regular fees or reserve fund aren’t enough.

California has many HOA communities; many homeowners find these fees among their most burdensome recurring costs. Because of high property values, strict building codes, and community amenities, HOA fees in places like Los Angeles, San Francisco, Orange County, or San Diego tend to be relatively high.

“Tax deductible” depends heavily on what the fees are for, how the property is used, and whether the fees count as business, rental, or personal expenses.

Federal vs. State Tax Rules (California Specifics)

If you want to see if HOA fees qualify for a tax deduction, first review IRS rules. After that, check California’s Franchise Tax Board, since the state tax code may follow federal law or bring in its own conditions. Most of the time, they match, yet sometimes California has unique adjustments that matter.

Use of Property / Scenario	IRS (Federal) Treatment of HOA Fees	California FTB / State Law Treatment*
Primary Residence (personal use only)	IRS Publication 530 (for homeowners) specifically lists that HOA fees are not deductible. Treated as personal living expenses.	Follows federal law: no special deduction for HOA fees on primary homes. California does not allow HOA fee deductions for primary residences.
Rental Property / Investment Property	HOA fees are deductible as operating expenses. They reduce your taxable rental income and go on Schedule E.	Same as federal: California generally allows the deduction of HOA fees when property is used for income‐generation (rental or investment). No additional state restrictions beyond those imposed by federal rules.
Home Office / Business Use of Part of Home	If part of your home is used exclusively and regularly for business, a prorated portion of HOA fees may be deductible (e.g., based on square footage). Use home office deduction rules.	Again, California generally follows the federal pattern. The same prorated portion of HOA fees used for business (home office) may be deductible, provided IRS criteria are met. No separate state rule that adds further benefit.

California state rules largely mirror federal rules in this area: if something is not deductible under federal law for a given scenario, California typically does not allow it either. There are no known state‐level deductions or credits that permit HOA fees for primary residences beyond what the IRS allows.

When HOA Fees May Be Deductible in California?

Here are the main scenarios in which HOA fees can be deductible, including what rules apply, what documentation you’ll need, and what limitations exist.

A. Rental Property / Investment Property

If you have a property in California that you rent out, either for long stays or short trips like Airbnb, HOA fees are treated as part of your rental costs. The IRS lets you subtract these regular expenses since they are needed to run the rental and bring in income. HOA dues fall under that if they cover maintenance, common area upkeep, etc.

You would report those deductions on IRS Schedule E (Supplemental Income and Loss). California generally accepts similar deductions when you file your state return.

If the property is only rented part of the time or used personally part of the time, you’ll need to allocate: only the portion used for rental counts. For example, renting 9 months means a 75% deduction of HOA fees, etc.

Special assessments: If the assessment goes toward repairs or routine upkeep, you may be able to deduct it. But when it funds big upgrades, like building a clubhouse or making major changes, you can’t deduct right away. In that case, the cost is added to your property’s value or recovered slowly through depreciation.

B. Home Office Deduction

If you use part of your home exclusively and regularly as a home office (for a business or self-employment), then a portion of many home expenses might be deductible. That includes a pro rata share of HOA fees. IRS rules (IRS Topic No. 509; Publication 587) set the criteria: exclusive use, regular use, and principal place of business.

For example, if your home office is 10% of your house’s total square footage, you may deduct about 10% of your HOA fees (but only that part which is required as part of operating the home). Be careful: amenities or HOA features used personally beyond business don’t count.

If you are an employee working remotely but not self-employed, the home office deduction rules tightened after tax reform; generally, employees cannot deduct home office expenses unless it’s a requirement of the employer and not reimbursed, etc. (which is rare under current rules).

C. Vacation / Second Home Used as Rental

If you own a second home or vacation property, and you rent it out part of the year, you may be able to deduct HOA fees for the portion of time it is rented. Must follow rules about how many days it's rented, and personal usage limitations.

Special assessments, etc., follow the same logic: deductible when for repair/maintenance, not when for improvements; improvements might increase the basis.

What HOA Fees Are Not Deductible

It also helps to know what can’t be deducted, so you don’t run into audit risk or mistakenly overclaim.

1. Primary residence personal use: HOA fees paid for your main home, used only as your place of residence, no rental, no business, are not deductible. These are personal, non-business expenses.

2. Amenities / personal usage: If HOA covers amenities that are used personally (pool, gym, clubhouse, etc.), that portion is not deductible in a home office or rental scenario unless they are legitimately part of the business/rental use.

3. Special assessments for capital improvements: Large-scale improvements paid via special assessments are usually not immediately deductible. They generally are added to cost basis, depreciated, or used to reduce capital gains on sale.

4. Improper allocation or usage: Claiming HOA fee deductions the wrong way can bring audit trouble. Saying the fee is for business when it’s personal or mixing personal and work use without proof is risky. Clear records matter a lot. Keep track of square footage, show exclusive use, and save every detail that supports the expense.

5. California state difference: California follows many federal tax laws, yet it also creates its own path in some areas. A deduction allowed under federal law could be rejected by California, or the state may limit it differently. These gaps can affect your return.

Special Considerations About HOA Fees in California

Living in California brings unique challenges when it comes to HOA costs and taxes:

1. High HOA Fees in Metro Areas: In cities like San Francisco or Los Angeles, HOA fees can exceed $1,000 per month. Homeowners often feel the financial pressure and naturally ask about deductions.

2. California-Specific Tax Credits: Unlike some states, California does not provide credits that offset HOA fees. Deductions follow federal IRS rules.

3. Separation of Use: If you use part of your property for personal living and part for business or rental, you’ll need to carefully separate expenses. Accurate bookkeeping is crucial to avoid IRS or FTB penalties.

4. Capital Gains Consideration: While HOA fees themselves aren’t deductible, special assessments for improvements may increase your home’s cost basis, reducing taxable gains when you sell.

FAQs

Can I write off HOA fees on a rental property in California?

Yes. HOA fees are deductible as an operating expense for rental properties, including both long-term rentals and short-term rentals like Airbnb.

Do HOA dues impact capital gains taxes when I sell my California home?

Regular HOA dues don’t. However, special assessments for capital improvements (like installing new roofing) may increase your cost basis, potentially lowering taxable capital gains.

Can I deduct HOA fees if I work from home?

Yes, but only if you qualify for the home office deduction. You must use part of your home exclusively for business, and only the proportional share of HOA fees is deductible.

Are HOA fees tax-deductible on my primary residence in California?

No. HOA fees for your personal residence are considered non-deductible personal expenses.

Can special assessments ever be deducted?

Not immediately. They are generally treated as capital improvements and may be factored in when calculating capital gains after a property sale.

Conclusion

Understanding whether HOA fees are tax-deductible in California can save you from costly filing mistakes.

The bottom line is clear: for most homeowners, HOA fees on a primary residence are not deductible. However, if your property is used for rental, investment, or qualified home office purposes, a portion may be eligible under both IRS and California Franchise Tax Board guidelines.

Because these rules depend on how your property is used—and even small missteps can trigger audits—it’s always smart to get professional advice. At HOA Unlimited, we help California homeowners and associations make sense of complex HOA matters, from fee management to compliance and financial planning.

If you want expert guidance to better manage your HOA fees or understand how they affect your taxes, call us today at 415-547-0337 and get clarity for your California property.