Tax Deductions and Credits
Shareholders in a co-op corporation are considered by the Internal Revenue Service to be homeowners. As a shareholder, you may be entitled to deduct your share of the real estate taxes and mortgage interest paid by the cooperative. If you obtained an individual mortgage to purchase your shares in the corporation (also known as a “share loan”), you are also entitled to deduct any interest paid on that loan. Read more.
For the 2022 tax year, you may claim the following co-op deductions:
- Mortgage interest = $7 per share
- Real estate tax = $29.57 per share
Therefore, approximately 40 percent of the maintenance charges you paid to the co-op in 2022 is tax-deductible. If you owned your apartment for only part of the year, you need to prorate the deductions accordingly. If you received any tax abatements during the year, your real estate tax deduction must be reduced by the total amount of the abatements you received.
Selling Your Shares – Capital Gain Exclusion
If you sell your shares in the co-op, you may be able to exclude some or all of the profit realized on the sale. If you can exclude all of the gain, you do not need to report the sale on your tax return; that is, you will not have to pay any taxes on the profit. If some (or all) of the gain cannot be excluded, it is taxable as a capital gain, and you must report it on Schedule D of Form 1040. Read more.