1120-H

What is an 1120‑H?

A 1120-H is the U.S. Income Tax Return for Homeowners Associations, which allow HOAs to exclude exempt function income from gross income.

Exempt function income consists of membership dues, fees, or other assessments that HOA members pay as owners, not customers, and cannot be for services provided individually–most often, assessments made to pay principal, interest, and real estate taxes on association property; to maintain association property; and for trash and public-area snow removal.

The qualifications to file an 1120-H are:

• The HOA must operate to provide acquisition, care, construction, maintenance, or management of the property.
• Eighty-five percent or more of the HOA’s units must be used for residential purposes.
• Sixty percent or more of its income must come from membership fees, dues, or assessments from owners.
• Shareholders or private individuals may not benefit from any profits of the HOA.

Why is an 1120‑H important?

Most HOAs are created as and operate as not-for-profit entities, but even non-profits may occasionally generate taxable income. Filing an 1120-H excludes the operational assessments listed above from taxable income.

Filing can be made even easier for board members of self-managed HOAs by using HOA-specific bookkeeping services that provide data transparency with a computer click or keystroke.

How can you use “1120‑H” in a sentence?

The 1120-H enables homeowner associations to claim the tax exemption allowed for certain HOA operating funds.