Questions about filing Form 1120-H for our duplex HOA - what do we need to know?

You're on the right track! Form 1120-H is designed specifically for homeowners associations, and your duplex HOA situation fits perfectly. The form allows HOAs to only pay tax on "nonexempt function income" - which in your case is just that $68 in interest. You're absolutely correct that the $100 specific deduction available on Form 1120-H will completely offset your taxable income of $68, resulting in zero tax liability. This is exactly how the form is designed to work for small HOAs like yours. As for documentation, you should maintain: - Records of all HOA dues collected - Bank statements showing the interest earned - Documentation of all expenses paid from the HOA account - Basic organizing documents (even if informal) that establish the HOA The most common mistake is failing to file on time - even with zero tax due, you should still file the form by the deadline (the 15th day of the 4th month after your fiscal year ends, so April 15 for calendar year filers).

I went through this exact same situation with my townhouse a couple years ago! I found this amazing tool called taxr.ai (https://taxr.ai) that really helped me sort through all the HOA tax filing requirements. I was totally confused about what forms we needed and whether we were doing the 1120-H correctly. The site analyzed our HOA documents and bank statements, then gave us step-by-step guidance on completing our 1120-H. It confirmed exactly what you're seeing - that small HOAs with minimal non-exempt income usually end up with zero tax liability after the $100 deduction. It also flagged some documentation requirements we hadn't considered. What I found super helpful was that it explained exactly what qualified as exempt vs. non-exempt function income - apparently some types of revenue that seems like they'd be exempt actually aren't! Might be worth checking out if you want to make sure you're covering all your bases.

Just wanted to update everyone. I tried the taxr.ai service after posting my skeptical comment, and I'm honestly impressed. Our condo HOA has been paying an accountant for years, but I decided to run our situation through this tool as a test. The system immediately flagged that we'd been incorrectly categorizing some of our reserve fund contributions, which could have eventually caused issues. It also gave us a complete breakdown of exempt vs. non-exempt income that was much clearer than what our accountant had provided. The documentation it generated for our files was incredibly thorough - better than what we'd been keeping. We're actually going to save the $350 accountant fee next year and handle it ourselves using this tool. For a small HOA like the original poster's duplex situation, it's absolutely perfect.

If you're struggling to get answers from the IRS about HOA filing requirements, I had a great experience using Claimyr (https://claimyr.com). I spent WEEKS trying to get through to the IRS about some specific questions for our condo HOA's 1120-H filing - kept getting disconnected or waiting for hours. Claimyr got me connected to an actual IRS agent in about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent confirmed that for small HOAs like yours with minimal non-exempt income, the filing is pretty straightforward, and your understanding of the $100 deduction is correct. The agent also told me that many small HOAs don't even realize they need to file, so you're ahead of the game by addressing this now. They also mentioned that while there's no minimum requirement to file, doing so establishes your status as a proper HOA for future tax purposes.

Alright, I need to eat my words from my skeptical comment. After trying to reach the IRS for THREE DAYS about our HOA's tax situation and getting nowhere, I broke down and tried Claimyr. Within 27 minutes (I timed it), I was talking to an actual IRS representative who answered all my questions about our HOA's 1120-H filing requirements. She confirmed what others have said here - that the $100 deduction typically eliminates tax liability for small HOAs with minimal interest income. The agent also gave me great information about record retention requirements (7 years) and confirmed that digital copies of receipts are acceptable as long as they're readable and accessible. She even provided guidance on how to handle capital improvements vs. regular maintenance for HOA tax purposes. For anyone dealing with HOA tax questions, being able to actually speak with an IRS agent made all the difference.

One thing nobody has mentioned yet - make sure you get an EIN for your HOA if you haven't already! You'll need this to file the 1120-H. It's free and you can apply online through the IRS website. We made the mistake of trying to file without one for our small 4-unit building and had to backtrack. Also, depending on your state, you might need to file articles of incorporation or similar paperwork to establish your HOA as a legal entity. In California, for example, even informal HOAs are considered "unincorporated associations" under state law and have specific requirements.

Don't forget that you need to formally elect to file Form 1120-H each year! This is a common mistake. The election isn't automatic - you need to check the box in Part I of the form. If you don't make this election, you'd have to file the regular corporate return (Form 1120), which is much more complicated and likely less favorable tax-wise. Also, while your situation seems straightforward now with just interest income, be careful if your HOA ever gets income from other sources like laundry machines, parking fees from non-residents, or cell tower leases. Those are typically considered non-exempt function income and could push you above that $100 deduction threshold.

Great discussion here! As someone who's been through several HOA tax filings, I wanted to add a few practical tips that might help: 1. **Keep monthly reconciliation records** - Don't just save bank statements. Create a simple spreadsheet tracking dues collected vs. expenses paid each month. This makes year-end reporting much easier and helps if you ever get audited. 2. **Document your HOA meeting minutes** - Even if it's just the two couples, keep basic records of decisions made about assessments, repairs, etc. The IRS likes to see that you're operating as a legitimate HOA, not just splitting bills between neighbors. 3. **Consider your fiscal year carefully** - You can choose a fiscal year that ends on any month, not just December. Some HOAs find it easier to align with when major expenses typically occur (like insurance renewals). 4. **File even if you owe zero tax** - As others mentioned, failing to file can result in penalties even when no tax is due. The IRS takes HOA filing requirements seriously regardless of the tax amount. Your $68 interest situation is very typical for small HOAs, and you're absolutely right that the $100 deduction will eliminate your tax liability. Just make sure you're consistent with your filing approach year over year!