Does the value of the federal tax deduction outweigh the administrative cost of forming and operating the district?
A 1988 Internal Revenue Service Tax Advisory Memo regarding a special district formed by a condominium association suggests that the federal income tax deduction applies only to expenses incurred for certain types of services (Attachment 3). It questioned the amounts members deducted for private fees and special benefits. While the memo applies only to the taxpayers in question, it suggests how the Internal Revenue Service might treat special district property tax deductions claimed by association members. As noted above, condominium associations provide a range of services, some of which are identical to those towns provide, such as trash pick and snow removal. The other services are more like those provided by private contractors. These services include landscaping, cleaning pools, maintaining tennis courts, and operating clubhouses. The Internal Revenue Service might disqualify deductions for these expenses. Association members should weigh the value of the deduction against the cos
