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Per IRS Instructions for Form 1120-H, page 1:

Purpose of Form

A homeowners association files Form 1120-H as its income tax return to take advantage of certain tax benefits. These benefits, in effect, allow the association to exclude exempt function income (defined later) from its gross income.

Electing to File Form 1120-H

A homeowners association elects to take advantage of the tax benefits provided by section 528 by filing a properly completed Form 1120-H. The election is made separately for each tax year and must generally be made by the due date, including extensions, of the income tax return.

Page 2:

Exempt function income.

Exempt function income consists of membership dues, fees, or assessments from (a) owners of condominium housing units, (b) owners of real property in the case of a residential real estate management association, or (c) owners of timeshare rights to use, or timeshare ownership interests in, real property in the case of a timeshare association. This income must come from the members as owners, not as customers, of the association's services.

Assessments or fees for a common activity qualify but charges for providing services don’t qualify.


Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.


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