Does Your HOA Fee Include Property Taxes?
Demystify your homeownership costs. Understand the key differences between HOA fees and property taxes to manage your housing budget effectively.
Many prospective homebuyers wonder if their homeowners association (HOA) fees cover property taxes. For most homeowners, these are distinct and separate financial obligations that are paid to different entities for different purposes. Understanding this separation is important for financial planning and budgeting when considering a home within an HOA community.
HOA Fees and Property Taxes are Separate
HOA fees and property taxes are distinct financial responsibilities for property owners. They are paid to different entities, serve different functions, and have separate payment schedules.
HOA fees go to the homeowners association, a private entity managing common areas and amenities. Property taxes are levied by local government entities, like county or municipal tax authorities, based on the property’s assessed value. Homeowners receive separate bills, and funds are allocated to entirely different services.
Understanding Homeowners Association Fees
Homeowners association (HOA) fees are regular payments made by residents in communities governed by an HOA, such as condominiums, townhouses, and some single-family developments. These fees fund the upkeep and improvement of shared spaces and resources. The HOA board determines the amount based on the association’s annual budget, which covers operational costs and reserve contributions.
HOA fees cover services and maintenance for common areas. This often includes:
Landscaping for shared grounds
Maintenance of amenities like pools, clubhouses, and fitness centers
Upkeep of shared utilities such as water for irrigation or lighting in common spaces
Master insurance policies for common structures
Administrative costs for managing the association
Contributions to reserve funds for future large-scale repairs or unexpected expenses like roof replacements or parking lot resurfacing
Payments are usually collected monthly, but some HOAs may opt for quarterly, semi-annual, or annual contributions.
Understanding Property Taxes
Property taxes are local taxes imposed on real estate owners by city, county, or state governments. They are a primary source of revenue for local governments, funding essential public services that benefit the entire community, such as:
Public schools
Police and fire departments
Road maintenance
Parks
Other municipal infrastructure and services
The amount is based on the assessed value, determined by local assessors. Methods and rates vary by jurisdiction; the bill is calculated by multiplying assessed value by the local tax rate (often a mill levy). Payments are handled by county or municipal tax authorities, typically due annually or semi-annually, though quarterly options exist. Many homeowners pay through a mortgage escrow account, where a portion of their monthly payment covers the tax bill.
Other Costs of Homeownership in an HOA
Beyond HOA fees and property taxes, HOA homeownership involves other financial obligations. A significant cost is the mortgage payment, covering principal and interest on the home loan.
Homeowner’s insurance is another expense, covering the individual unit’s interior and personal belongings. This differs from the HOA’s master policy, which covers common structures. Homeowners are also responsible for individual utility bills (e.g., electricity, water, gas, internet). Costs for interior maintenance and repairs are also the homeowner’s responsibility.