Rental Income and expenses

Forum|Forum|1 year ago
January 3, 2025
1 reply
6 views

I am married, but own a separate rental property with 1 sibling, 50/50 as 'tenants in common' (not owned with spouse).

I collect all rental income, pay all of the mortgage, pay all expenses from rental income and/or out of my own pocket (sibling does not contribute financially). Do I need to claim 100% of the rental income and 100% of the expenses? Or do I claim 50% of income and expenses?

Mike9241

Level 15

The first issue is whether a partnership return needs to be filed. if it is, the penalty for failure to file when there are 2 partners is $420 for each month late for up to a maximum of 12 months

from 2023 partnership return instructions

Who Must File
Domestic Partnerships
Except as provided below, every domestic partnership must file
Form 1065, unless it neither receives income nor incurs any
expenditures treated as deductions or credits for federal income tax
purposes.

As for splitting income/expenses what did you agree to?

Was it in writing, oral, or nothing? Usually, a written document will prevail. With an oral agreement, there can be disputes as to what was agreed to that could end up in court. When there is no agreement, again courts could get involved. state laws vary, so perhaps your best option a a tax or real estate attorney.

Mike9241

tout_le_monde2000Author

Level 2

Thank you for your reply.

There was never an agreement as to how to handle rent or expenses (oral or written, other than sibling saying they were not going to pay loan payments). The property was inherited, sibling wanted to keep rather than sell, co-signed on a loan, but sibling has not been active or available, so I have continued to collect rent, pay repairs and expenses, and pay loan (paid from rental income or personal funds if rent didn't cover these expenses; all funds flow in and out of a personal account held in my name only).

I am very surprised to hear about having to have a partnership as it was never brought up in the
Turbotax questions (but does ask if I own the property 100% or own with someone else that gets the 1098). So to clarify, even though the Turbotax software accounts for rental income and expenses, I still need to have a partnership established with sibling? Would this be the case if rental was owned with a spouse?

So does it make better sense to just claim 100% income and expenses since it all goes into/out of my account and there has been zero contribution from sibling, to avoid the partnership filing since co-owner is not contributing financially or is making no decisions regarding the property?

Or is this a question for tax or real estate attorney?