Ownership of rental and primary residence in different states

[Mark_NC]

We have two properties with both of us on the title.  One property in CA we turned into a rental recently after moving to another state.  And a primary residence in NC.  My spouse is suggesting I claim 100% ownership of the rental property and they claim 100% ownership of the primary residence for tax purposes.  I manage the rental and would claim the full income and expense.

Is this OK for tax purposes?  I certainly can consult a tax attorney if that would help, and I think it would.  Just wondering what others have done in this situation.

[Mike9241]

filing jointly is usually better.  filing separately can result in loss of certain credits and deductions, if one of you itemizes both must and if one uses the standard deduction both must,  then there are the passive activity loss rules. generally, if two parties own a property, income/loss must be split based on respective ownership %'s.

however, the only way to know for sure is to prepare 3 retuns.  1 married filing separately for each of you and 1 joint 

[Mark_NC]

Sorry.  We’re not technically married.  But we have been together a long time.

[JosephS1]

As Mike9241 stated, if 2 parties own a property then the income and expenses allocation should be based on the ownership percentage.  The primary social security number on any 1098 or similar forms for the properties in question should determine who lists what first.  There are indication boxes to check if the ownership is to be split on a percentage basis.  The second party would take their percentage and list it as normal also with the associated checkbox showing partial ownership.  The Following steps should assist you:

1. In the wages and income section scroll down to rentals, royalties, and farm
2. At Rental Properties and Royalties (Sch E), click start
3. Answer the basic question on the next 8 screens
4. On screen 9 it will ask if any of these uncommon situations apply and click you were not the only owner of the property, click continue
5. The next screen will ask what percentage of ownership you have.  Enter the percentage and then click continue
6. Follow along as the questions will be if you want TurboTax to calculate the allocation for you.  It is your decision.

I suggest you have your partner with you when all this is being prepared as they will have to follow the same procedure.  If you have TurboTax Live! you can also call in for assistance if you get hung up at any point.

@Mark_NC

[AmirD]

Hello Everyone. I have 2 rental properties. one in NC and one in CA. I aggregate all properties and total schedule E income is 0; but I have made $1200 profit from the NC rental property which being offset by the loss from the CA properties. I am a resident of CA with just this rental in NC. Do I need to file tax return with the state of NC?

[AnnetteB6]

Yes, you will most likely be required to file a NC non-resident tax return.

The filing requirements state that you must file a return if you were "not a resident of North Carolina at any time during the tax year 2022 but you received income in 2022 from North Carolina sources that was (1) attributable to the ownership of any interest in real or tangible personal property in North Carolina..."

The statement goes on to say that if your total income from both sources inside and outside NC exceeds certain limits based on your filing status, then you would be required to file a NC return.  

Use the following link to see those income limits:  NC Individual Income Filing Requirements

@AmirD