Condominiums

A condominium is most often a dwelling unit in a multi-unit building, but can also take other forms, such as a townhouse or garden apartment.

monthly rental fee of $1,125. In addition to your rental income of $13,500 (12 x $1,125), you had the following expenses.

Mortgage interest . . . . . . . . . . . . . . . . . . . . . . . . . $8,000 Fire insurance (1-year policy) . . . . . . . . . . . . . . . . . 250 Miscellaneous repairs . . . . . . . . . . . . . . . . . . . . . . 400 Real estate taxes imposed and paid . . . . . . . . . . . . . 500 Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200

You depreciate the residential rental property under MACRS GDS. This means using the straight line method over a recovery period of 27.5 years.

You use Table 2-2d to find your depreciation percentage. Because you placed the property in service in February 2020, you continue to use that row of Table 2-2d. For Year 6, the rate is 3.636%.

You figure your net rental income or loss for the house as follows.

Total rental income received

($1,125 × 12) . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,500 Minus: Expenses

Mortgage interest . . . . . . . . . . . . . . . . $8,000 Fire insurance . . . . . . . . . . . . . . . . . . 250 Miscellaneous repairs . . . . . . . . . . . . . 400 Real estate taxes . . . . . . . . . . . . . . . . 500 Maintenance . . . . . . . . . . . . . . . . . . . 200 Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . 9,350 Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,150 Minus: Depreciation ($120,000 x 3.636% (0.03636)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,363

Publication 527 (2025) Chapter 4 Special Situations 21

If you own a condominium, you also own a share of the common elements, such as land, lobbies, elevators, and service areas. You and the other condominium owners may pay dues or assessments to a special corporation that is organized to take care of the common elements.

Special rules apply if you rent your condominium to others. You can deduct as rental expenses all the expenses discussed in chapters 1 and 2. In addition, you can deduct any dues or assessments paid for maintenance of the common elements.

You can’t deduct special assessments you pay to a condominium management corporation for improvements. However, you may be able to recover your share of the cost of any improvement by taking depreciation.