Can Membership Income Be taxable?

When filing form 1120, income is designated as member/nonmember (and capital), and while member income can be carried over and used up on a subsequent year, membership income can be taxable.

When filing form 1120-H only exempt function income is tax-free. Exempt function is defined as being assessments billed as a result of membership in the organization, and is unilaterally charged to all members. This includes assessment income. What this does NOT include is “per use” fees. Thus, if the Association charges members fees to use common areas, those fees are taxable on 1120-H. (Note: they would be member income on 1120 and may not be taxed if net membership income is zero or less)

TIP – IRS has said if an Association assesses a fee on an annual basis rather than on a monthly or per use basis, the fee is tax-free. So, a planning tip is to annual assess for the fee (e.g. RV parking space, storage unit) rather than on a monthly basis