I own half of a rental house. Do I enter the whole rent tenants paid, or just the half that is mine?

[bwsnyder2000]

TurboTax knows I own half, and says "We'll do the math" but that doesn't tell me the answer.  Also, TurboTax doesn't show you whatever math it's doing.  Let's say tenants paid $10,000.  I entered $5,000 in 'Rental Income' because that's my part of rental income. TurboTax then also cuts this wrongly in half? Or not? It doesn't show details.

[VolvoGirl]

Is this a duplex or a single house?  Who owns the other half?  You might need to file a partnership return for the rental.

[bwsnyder2000]

I own it with a sibling, it was the family home.  It's a single family house, not a duplex.  Not a partnership.  Family owned.

[Mike9241]

are the tenants related to either your sibling or you? if not, your sibling and you have a partnership regardless of the type of property you are renting.  the penalty for failure to file a partnership return is $400 a month for a maximum of 12 months for each year you failed to file.  siblings do not qualify for any of the exceptions to filing a partnership return.

[Hal_Al]

I'm of the opinion that you do not need to file a partnership return.  You can report your share of income and expenses on Schedule E.  I'm in a similar situation and that's how I do it.

References: https://turbotax.community.intuit.ca/community/investments-rentals/discussion/co-ownership-on-a-rent...

https://www.johnrdundon.com/co-ownership-of-rental-real-estate-does-not-require-partnership-formatio...

https://www.nolo.com/legal-encyclopedia/filing-your-taxes-when-youre-landlord.html

As to how you enter it; TurboTax (TT) can handle it either way.  I find it easier to just enter my half.  

[Carl]

Overall, if you just report the rental income/expenses on a 1065 partnership return, your life will be significantly easier and much simpler.

But if you want to report only your half on SCH E of your personal tax return, then do exactly that. Report *YOUR* half. Therefore, you claim 100% ownership and cut *everything* in half. So if the cost basis of the property is $10,000, your cost basis is $5000. If the rent received for the year is $12,000, your rent received is $6000.

When you elect to let the program "do the math" for you, the program can not do "all" the math. It's just not possible. Some if it you have to do yourself manually, no matter what. So to keep it simple,you might as well do all the math yourself, and just cut everything in half.

[Anonymous_]

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@Hal_Al wrote:

I'm of the opinion that yo do not need to file a partnership return.   

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I concur. 

...mere co-ownership of property that is maintained, kept in repair, and rented or leased does not constitute a separate entity for federal tax purposes. For example , if an individual owner, or tenants in common, of farm property lease it to a farmer for a cash rental or a share of the crops, they do not necessarily create a separate entity for federal tax purposes.

See https://www.law.cornell.edu/cfr/text/26/301.7701-1

See also https://www.irs.gov/pub/irs-drop/rp-02-22.pdf

[Anonymous_]

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@Carl wrote:

Overall, if you just report the rental income/expenses on a 1065 partnership return, your life will be significantly easier and much simpler.

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I am not tracking the above-quoted statement since filing a 1065 makes life more difficult and complex.

Among other things:

* An EIN needs to be obtained for the partnership.

* An extra return needs to be prepared and filed with the IRS and that return has a due date that is a month earlier than individual income tax returns.

* K-1s need to be issued and the partners have to enter information from their K-1s into their individual income tax returns and retain their copies (until the partnership is dissolved and a final return is filed).

* The partners need to keep track of their inside and outside bases for the point at which there is a sale of their interest in the partnership or partnership property.

* Generally, compliance costs are increased as a result of all of the aforementioned. 

The parties are really much better off by each entering their half on Schedule E as suggested by @Hal_Al.

[Mike9241]

Partnership
A partnership is the relationship between two
or more persons who join to carry on a trade
or business, with each person contributing
money, property, labor, or skill and each
expecting to share in the profits and losses
of the business whether or not a formal
partnership agreement is made.
The term “partnership” includes a limited
partnership, syndicate, group, pool, joint
venture, or other unincorporated
organization, through or by which any
business, financial operation, or venture is
carried on, that isn't, within the meaning of
regulations under section 7701,

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.

the above is from the IRS instructions for a partnership return. it would seem your venture meets the definition of a partnership.  However, I will agree that many partnerships do not file returns as required but split the reporting.  it's your money and your risk

[Anonymous_]

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@Mike9241 wrote:

the above is from the IRS instructions for a partnership return. it would seem your venture meets the definition of a partnership. 

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Except the regulations under the same code section you mentioned state, essentially, that the co-ownership of property that is maintained, kept in repair, and rented or leased does not constitute a separate entity for federal tax purposes.

Regardless, there does not really appear to be much risk involved if the co-owners report their shares (income and expenses) on their Schedules E rather than from a K-1 (1065). The rental income and expenses would be exactly the same in either case. 

[Callhd]

Hi

How do you file the schedule E depreciation

[DavidD66]

If you are going to report your half of the rental on your tax return (as opposed to a Form 1065 - Partnership return, as discussed above, just treat your 50% as if it was the entire rental property.  Treat your 50% as if it was a stand alone piece of property you owned 100% of.  You report 50% of the total rent.  You will report 50% of each expense.  You will set up an asset with a basis that is 50% of the actual cost of the entire house.  The calculated depreciation on your return should be 50% of the total depreciation.  The other owner should have an identical (or very close to it) Schedule E.  

Or, as discussed above, you can file a Form 1065 for 100% of the house, the rent, expenses, etc., and then you will get a Form K-1 with your 50% of the revenue, expenses, etc. to enter on your tax return.  

To report the depreciation on Schedule E, you have to set up the property (your 50%) as an asset.  Once the asset is set up, the program will calculate the depreciation and include it on Schedule E.  TurboTax will guide you through setting up the asset in the rental property section.  You will need the property tax assessment (which you should be able to get online from your county tax assessors office) in order to determine the value of the land, which must be set up as a separate asset that is not depreciated.