What is a housing cooperative?
The main distinction between a housing co-op and other forms of homeownership is that in a housing co-op you don’t directly own real estate. But if you don’t own real estate, what exactly are you buying? You are buying shares or a membership in a cooperative housing corporation. The corporation owns or leases all real estate. As part of your membership (being a shareholder) in the cooperative you have an exclusive right to live in a specific unit (this is established thorough a occupancy agreement or proprietary lease) for as long as you want, as long as you don’t break any of the rules or regulations of the cooperative. As part of your membership, you also have a vote in the affairs of the corporation.
Melrose Terrace charges residents a monthly maintenance fee. The amount of the monthly charge varies depending on the number of shares owned. The charges cover your proportionate share of operating and maintaining the cooperative, which includes property taxes, management fees, maintenance costs, insurance premiums, utilities, and contributions to reserve funds.
Even thought you don’t pay real estate taxes directly, federal tax law allows you to deduct your share of the co-op tax payments, as well as your mortgage interest payments, on your personal income tax return.