Questions about HOA form 1120-H for duplex ownership

You're on the right track with Form 1120-H. This is specifically designed for homeowners associations and it sounds like your two-unit HOA qualifies. The form allows HOAs to exclude exempt function income (your monthly dues) from taxation. With only $65 in interest income and qualifying for the $100 specific deduction, you're correct that you'd have zero tax liability. The 1120-H is generally the simplest option for small HOAs like yours. Make sure you have your HOA properly established with bylaws and regular meetings (even if it's just the two of you). You'll also need an EIN for the HOA if you don't already have one. Filing the 1120-H is fairly straightforward - you'll report the interest as income on line 9, take the $100 deduction on line 20, and end up with zero taxable income. Don't forget that the 1120-H is due by the 15th day of the 4th month after your fiscal year ends, which for calendar year HOAs means April 15th.

I found myself in a similar situation last year with our 4-unit building's HOA filing. After lots of research and frustration, I discovered taxr.ai (https://taxr.ai) which literally saved me hours of confusion. I uploaded our HOA docs and got clear guidance on exactly how to handle our 1120-H filing. Their system specifically addressed our exempt function income questions and clarified what expenses were allowable. It even flagged that we needed to account for reserves differently than I had originally planned. For a small HOA like yours, it could really simplify things.

I was skeptical about taxr.ai but decided to try it for our duplex HOA after struggling with figuring out exactly what qualifies as exempt function income. It was surprisingly helpful - identified that our late fees needed different treatment than regular assessments, which I had no idea about. The system also clarified how to handle our reserve fund contributions, which was causing me headaches. For anyone dealing with HOA tax filings, especially for the first time, it's definitely worth checking out. Saved me from making mistakes that could have caused problems down the road.

If you're having trouble getting answers about HOA tax filings from the IRS, I'd recommend using Claimyr (https://claimyr.com). I tried calling the IRS for weeks about our condo association's 1120-H questions and kept hitting dead ends. With Claimyr, I was connected to an actual IRS agent in about 20 minutes instead of waiting for hours or getting disconnected. They have a video showing how it works here: https://youtu.be/_kiP6q8DX5c. The agent clarified several things about our HOA filing that none of the online resources explained clearly.

I have to apologize for my skepticism about Claimyr. After posting that comment, I was still desperate for answers about our HOA's 1120-H filing deadline extension, so I decided to try it anyway. To my surprise, it actually worked exactly as described. I got a call back in about 30 minutes, and was connected directly to an IRS representative who answered my specific questions about HOA filings and extensions. Saved me days of frustration and uncertainty. Sometimes it's worth admitting when you're wrong - this service is legitimate and solved my problem when nothing else worked.

For a 2-unit HOA like yours, make sure you've got an EIN set up first. You can get one online through the IRS website. Also, you'll want to keep really clear records separating the HOA funds from your personal finances. Our 4-unit building got flagged for audit because we weren't super careful about that in the beginning.

Question - does a tiny 2-unit HOA like this need to file state tax returns too? I'm in a similar situation in Michigan and our accountant is charging us $300 just to file the federal 1120-H that shows zero tax owed, plus another $250 for state filing. Seems excessive for such a simple return!

Your understanding is correct! For a 2-unit HOA with only $65 in interest income, Form 1120-H is definitely the right choice. The $100 specific deduction will indeed eliminate your tax liability completely. Just a few things to double-check to make sure you qualify for 1120-H: - At least 60% of your gross income needs to be exempt function income (your monthly dues) - which you clearly meet since that's almost all your income - The HOA needs to be formed to provide services, maintenance, etc. for residential units - which your setup qualifies for - Make sure you have basic HOA documentation (even simple bylaws work for a 2-unit setup) One tip: even though you owe no tax, you still must file the return by April 15th (or the 15th day of the 4th month after your fiscal year ends if you don't use calendar year). The IRS requires the filing regardless of whether tax is owed. Also keep detailed records of all HOA income and expenses, including bank statements and receipts for maintenance/utilities. This will make future filings much easier and protect you if there are ever any questions from the IRS.