15.9 Cooperative and Condominium Apartments

Cooperative apartments.

If you are a tenant-stockholder of a cooperative apartment, you may deduct your portion of:

• Mortgage interest paid by the cooperative on its debts to buy the land, or buy, build or improve the housing complex, provided the apartment is your first or second home (15.1). This includes your pro rata share of the permanent financing expenses (points) of the cooperative on its mortgage covering the housing project.
• Real estate taxes paid by the cooperative (16.6). However, if the cooperative does not own the land and building but merely leases them and is required to pay real estate taxes under the terms of the lease, you may not deduct your share of the tax payment.

In some localities, such as New York City, rent control rules allow tenants of a building converted to a cooperative to remain in their apartments even if they do not buy into the co-op. A holdover tenant may prevent some co-op purchasers from occupying an apartment. The IRS ruled that the fact that a holdover tenant stays in the apartment will not bar the owner from deducting his or her share of the co-op’s interest and taxes.

Condominiums.

If you own an apartment in a condominium, you have a direct ownership interest in the property and are treated, for tax purposes, just as any other property owner. You may deduct your payments of real estate taxes and mortgage interest. You may also deduct taxes and interest paid on the mortgage debt of the project allocable to your share of the property. The deduction of interest from condominium ownership is also subject to the two-residence limit (15.1). If your condominium is used part of the time for rental purposes, you may deduct expenses of maintenance and repairs and claim depreciation deductions subject to certain limitations (9.7).