Key Tax Law Updates: What Homeowners, Nonprofit Hospitals, and Investors Need to Know.

As tax laws continue to evolve, recent IRS rulings and legislative discussions are bringing significant changes that could impact homeowners, nonprofit organizations, hedge fund managers, and individual taxpayers. Below is a breakdown of the most pressing tax issues and what they mean for you.

Homeowner Associations Face Strict Tax-Exempt Rules

The IRS is making it increasingly difficult for homeowner associations (HOAs) to qualify for tax-exempt status as social welfare organizations. To be eligible, an HOA must serve the public good, offer open access to its facilities, and cannot primarily benefit private homeowners. A recent IRS decision denied tax-exempt status to a gated community, reinforcing the government’s stance against tax benefits for private residential groups.

Nonprofit Hospitals Under Senate Scrutiny

A bipartisan group of senators is putting pressure on the IRS to tighten oversight on nonprofit hospitals, alleging that some fail to provide adequate charitable care while aggressively collecting debts. The proposed changes could lead to stricter financial assistance policies and increased accountability for hospitals that claim tax-exempt status.

Hedge Fund Tax Breaks Could Disappear

The "carried interest" tax break, which allows hedge fund and private equity managers to treat their earnings as long-term capital gains rather than ordinary income, is once again under threat. While the 2017 tax law imposed a three-year holding period to qualify for this benefit, lawmakers are considering eliminating the break entirely as part of broader tax reforms.

Tax Return Preparation Fees: What’s Deductible?

The 2017 tax law suspended the deduction for tax return preparation fees on Schedule A through 2025. However, there are still ways to claim these costs:

• If you file Schedule C (sole proprietors), E (rentals/royalties), or F (farmers), tax prep fees related to those activities remain deductible as business expenses.

• Taxpayers using these schedules can allocate a portion of their total tax preparation costs and deduct them accordingly.

  
  

How to Stay Prepared

With potential changes on the horizon, now is the time to review your tax strategies. Whether you're a homeowner, investor, business owner, or nonprofit leader, our firm can help you navigate these complexities. Contact us today to ensure you're in compliance and maximizing your tax benefits.

Reference: The Kiplinger Tax Letter: Vol. 100, No. 4