Form 1120-H is the federal income tax return a homeowners association can choose to file to get the section 528 tax benefits. Filing it lets the association leave its exempt function income, mainly members' dues and assessments, out of gross income, so it's only taxed on things like interest and non-member income. It's an election made each year, simply by filing the form.
Everything below comes from the 2025 Instructions for Form 1120-H and the 2025 form, as of October 2026.
Who qualifies to file Form 1120-H
Three types of association can use it: a condominium management association, a residential real estate management association and a timeshare association. To qualify for the year, all of these must apply:
- At least 60% of the association's gross income must be exempt function income.
- At least 90% of its expenses must be to acquire, build, manage, maintain and care for its property, plus, for a timeshare association, activities for its members.
- No private shareholder or individual can profit from its net earnings, except through the property work above or a rebate of excess dues, fees or assessments.
- It must file Form 1120-H to make the section 528 election.
Items B and C on the form are where you show the 60% gross income test and the 90% expenditure test.
What counts as exempt function income
| Usually exempt function income | Not exempt function income |
|---|---|
| Assessments to pay principal, interest and real estate taxes on association property | Interest on amounts in a sinking fund |
| Assessments to maintain association property | Payments from nonmembers |
| Assessments to clear snow from public areas and remove trash | Members' payments for special use of facilities |
| Membership dues, fees or assessments from owners | Payments for work on nonassociation property, and members' transportation payments |
The income has to come from members as owners, not as customers. Assessments for a common activity qualify, but charges for providing services don't.
The tax rate and the $100 deduction
Taxable income is gross income excluding exempt function income, minus deductions directly connected with producing that other income. That includes a specific $100 deduction. The net operating loss deduction and the special corporate deductions aren't allowed.
The rate is flat: 30% for condominium management and residential real estate management associations, and 32% for timeshare associations. It applies to both ordinary income and capital gains, as of October 2026.
Form 1120-H or Form 1120?
Here's the part many boards miss: Form 1120-H is optional. The instructions say an association should compare its total tax on Form 1120-H with its total tax on Form 1120 and file whichever gives the lowest tax. The 1120-H flat rate is simple, but it isn't automatically the cheaper choice, so run both calculations every year rather than filing the same form out of habit.
The choice is made separately for each tax year, generally by the due date including extensions. Once Form 1120-H is filed, the election can't be revoked for that year without IRS consent, which means a ruling request and a user fee. If the association misses the election, there's an automatic 12-month extension to make it under Regulations section 301.9100-2, as long as it takes corrective action within 12 months of the due date.
Who shouldn't file it
If the association is tax exempt under section 501(a), it doesn't file Form 1120-H; it follows section 6033 instead. If it loses exempt status, Regulations section 1.528-8(e) applies. And association property means more than the common areas: it includes property the association holds, property members hold in common, property members hold privately within the association, and government-owned property used to benefit the unit's residents.
When Form 1120-H is due
| Situation | Due date |
|---|---|
| Most associations | 15th day of the 4th month after the tax year ends |
| Fiscal year ending June 30 | 15th day of the 3rd month after the tax year ends |
| Short tax year ending any time in June | Treated as ending June 30, so 15th day of the 3rd month |
| Need more time | File Form 7004 by the regular due date |
An extension on Form 7004 gives more time to file, not more time to pay the tax.
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E-filing and where to mail it
Associations can generally e-file Form 1120-H, and they're required to if they file 10 or more returns of any type in the calendar year, counting employment tax and information returns such as Forms 1099, unless they get a waiver. Paper returns go to the Kansas City or Ogden service center depending on the state where the association's principal office is located. The form also allows a foreign tax credit and the general business credit, and an elective payment election for certain investment credits.
How to complete it, step by step
- Tick the type of association in item A.
- Work out the 60% and 90% tests for items B and C using the association's own accounting method.
- List gross income that isn't exempt function income, such as interest and nonmember payments.
- Subtract directly connected deductions and the $100 specific deduction.
- Multiply taxable income by 30%, or 32% for a timeshare association.
- File by the due date, or file Form 7004 first.
Associations that file this return are usually run by volunteer boards collecting dues, and our comparison of HOA management software covers tools made for that job.
The verdict
For most HOAs, Form 1120-H is the easy way to keep dues out of tax. Run the 60% and 90% tests every year, because one big special-use or nonmember income year can knock you out, and do the side-by-side with Form 1120 before you file, because once the 1120-H is in, that year's choice is locked.
Frequently asked questions
Who can file Form 1120-H?
A condominium management association, a residential real estate management association or a timeshare association that meets the 60% gross income test, the 90% expenditure test and the other section 528 conditions.
What is the tax rate on Form 1120-H?
A flat 30% for condominium and residential real estate management associations, and 32% for timeshare associations, on both ordinary income and capital gains.
When is Form 1120-H due?
Generally by the 15th day of the 4th month after the end of the tax year. Associations with a June 30 fiscal year file by the 15th day of the 3rd month.
Does an HOA have to file Form 1120-H?
No. It's an election. An association can file Form 1120 instead and should compare the tax on each to see which is lower.
Can an association change its mind after filing Form 1120-H?
Not for that year without IRS consent. The election can't be revoked unless the IRS agrees, which needs a ruling request and a user fee.
