Joint ownership with sister

[Jheneise]

I recently helped my sister purchase a house. Our total cash investment began with an approximate 25% (me) to 75% (her) cash contribution for the purchase, upgrades and short term loan which has been paid off. Our agreement is that she and her son will be the sole occupants. I will assume the cost for insurance, HOA, taxes, and repairs. Those costs will be tracked and will cause my percentage of ownership to increase and hers to decrease based on our total overall investment percentages. There is no money to be exchanged between us for any other purposes related to this property.  

My questions is:

How do I list this property on my taxes?

[DaveF1006 · Accepted solution]

Since this is a personal residence, you can report this in your return but the only tax advantage you have is that you can deduct property taxes that you pay for the property.  Costs for repairs and HOA fees are non deductible.

Whatever cash you put down and upgrades are added together and will form a cash basis for your percentage of ownership. This will be relevant when you do sell the house in determining capital gains.  Right now though you will not report this in your return. Keep any records up any upgrades and your initial investment for future reference.

To report your portion of your property tax, you will go to: 

1) federal>deductions and credits>All tax breaks>Your Home>show more

2) Select property(Real Estate Tax)>start

Here is a Turbo Tax link that will give you some information on what i just talked about. Please note the section where it addresses home improvements. 

[Carl]

I am making two assumptions here.

1) Your name is listed on the deed as an owner.

2) Your name is on the mortgage (if any) making you legally liable for the loan.

will assume the cost for insurance, HOA, taxes, and repairs.

None of that is tax deductible. Not a penny.

For your taxes only, your cost-basis in the house is what *YOU* paid towards it's purchase. That's 25% according to you. But this *does* *not* *matter* at this point in time for your 2019 tax return. It will not matter until the tax year one of three things happens in your life.

1) You convert the property or any part of it to business use (such as a rental).

2) You sell the property.

3) You die.

The only things you can claim/deduct on your 2019 tax return for this property is the property taxes and the mortgage interest that *you* actually paid. For taxes, it does not matter if you paid 100% of those deductible expenses even though you only have 25% ownership in the property. If *you* pay it and can prove it if audited, you can deduct it. Period.

Now for tax purposes based on your scenario with "ONLY" the information you've provided, any transfer of ownership percentage from your sister to you is considered a gift from your sister to you. If the value of that gift exceeds $15,000 in any one tax year, then your sister *NOT YOU* is required to report it to the IRS on an IRS Form 709 - Gift Tax Return.

Now the name of that form is a misnomer. There is no actual tax assessed on anyone on the value of the gift given, provided the gift given by any one individual to another individual in a tax year does not exceed a total of $11.4 million dollars over the giver/recipient's lifetime. But if given more than $15,000 in a tax year, the giver (not the recipient) is required to report it to the IRS.