A Tax Break on Condo Assessments
You might not have to worry about capital gains tax when you sell a condo that's undergone capital improvements.
I live in a condo that is 20 years old, and we are now faced with major projects, including replacing the roof. If the condo board charges owners a special assessment for these costs, can we apply that amount to help lower the tax bill when we sell our condos? -- H.G., via e-mail
If the assessment is specifically for capital improvements, rather than regular maintenance, the amount can be added to your cost basis when you sell your condo, which could reduce your taxable gain. “It is important to have documentation of the nature of the assessment and what the funds were used for,” says Susan Howe, a certified public accountant in Philadelphia.
But you may not have to worry about capital gains tax anyway. Most people no longer have to pay taxes on their profits when they sell their principal residence, whether it’s a house, condo, co-op or duplex, says Greg Rosica, a tax partner at Ernst & Young and a contributing author to the EY Tax Guide 2015. If you lived in the home for two of the five years before the sale, up to $250,000 in home-sale profits is tax-free, or $500,000 if you’re married and file jointly.