Open TurboTax

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
gary-c-yuen
New Member

My father and I co-own a rental property together. It is a condominium that we rent out. How should we divvy up the rental income and tax/ interest deductions?

My dad and I co-own a rental condominium. Currently my father collects the rent and keeps it for himself as part of our arrangement. He also pays for the renters insurance and any maintenance costs. 

On my end, I pay for the mortgage/ mortgage interest and property tax. 

Can my dad claim the rental income property tax income on his tax form while I claim the property tax and interest deductions? 

1 Best answer

Accepted Solutions
maglib
Level 10

My father and I co-own a rental property together. It is a condominium that we rent out. How should we divvy up the rental income and tax/ interest deductions?

Thanks for that question as it made me do my homework and shockingly the IRS does not from what I found specify who must take the income and expense in proportion to their ownership....  I would definitely ensure that if you go this route, you document it clearly and keep proof of who got the cash and made the payments... individuals are cash basis taxpayers.

I do know that in NJ once when we coowned property that since we couldn't use the deduction the coowner paid all the real estate taxes and took the deduction and yes she actually paid them 100% and NJ corrected the return and would not allow her regardless of proof that she had paid them 100%.... They sited a NJ rule, the fed didn't audit it.....  I can't find the NJ rule.

Although I see no writing to the contrary from the IRS.

So then, the rent could be shared in varying proportions calculated to produce the maximum tax advantage for each owner, especially if one owner is a higher rate tax payer and the other a non or basic rate taxpayer.

See Rev. Rul. 71-268 long as the person paying the interest and taxes has an ownership interest in the property then that person can deduct the full amount paid. 

The rule when it comes to mortgage/home equity interest and property taxes is that 1) you must be obligated to pay the interest/taxes, and 2) you must have actually paid them.

If you and she are joint owners of the property, and you have taken out a mortgage/home equity loan against the property, and you make the payments, then you are entitled to take the deduction for the interest.

If you and she are joint owners of the property, then you are both obligated to pay the taxes, and if she is the one who actually pays the taxes, then she is the one who is entitled to the deduction for the taxes.

If both of you split the payments for the mortgage and taxes, then you are each entitled to take deductions for a proportional share of those expenses, assuming again, that you are both equally obligated to make the payments.

 So IRS allowed, did not subject to audit, our deduction although NJ state law did not, I can no longer find the rule the state sited.

Make sure you document your agreement FULLY!!!

**I don't work for TT. Just trying to help. All the best.
***Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

8 Replies
maglib
Level 10

My father and I co-own a rental property together. It is a condominium that we rent out. How should we divvy up the rental income and tax/ interest deductions?

Thanks for that question as it made me do my homework and shockingly the IRS does not from what I found specify who must take the income and expense in proportion to their ownership....  I would definitely ensure that if you go this route, you document it clearly and keep proof of who got the cash and made the payments... individuals are cash basis taxpayers.

I do know that in NJ once when we coowned property that since we couldn't use the deduction the coowner paid all the real estate taxes and took the deduction and yes she actually paid them 100% and NJ corrected the return and would not allow her regardless of proof that she had paid them 100%.... They sited a NJ rule, the fed didn't audit it.....  I can't find the NJ rule.

Although I see no writing to the contrary from the IRS.

So then, the rent could be shared in varying proportions calculated to produce the maximum tax advantage for each owner, especially if one owner is a higher rate tax payer and the other a non or basic rate taxpayer.

See Rev. Rul. 71-268 long as the person paying the interest and taxes has an ownership interest in the property then that person can deduct the full amount paid. 

The rule when it comes to mortgage/home equity interest and property taxes is that 1) you must be obligated to pay the interest/taxes, and 2) you must have actually paid them.

If you and she are joint owners of the property, and you have taken out a mortgage/home equity loan against the property, and you make the payments, then you are entitled to take the deduction for the interest.

If you and she are joint owners of the property, then you are both obligated to pay the taxes, and if she is the one who actually pays the taxes, then she is the one who is entitled to the deduction for the taxes.

If both of you split the payments for the mortgage and taxes, then you are each entitled to take deductions for a proportional share of those expenses, assuming again, that you are both equally obligated to make the payments.

 So IRS allowed, did not subject to audit, our deduction although NJ state law did not, I can no longer find the rule the state sited.

Make sure you document your agreement FULLY!!!

**I don't work for TT. Just trying to help. All the best.
***Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
96kwc
New Member

My father and I co-own a rental property together. It is a condominium that we rent out. How should we divvy up the rental income and tax/ interest deductions?

What about the depreciation of the rental?  Should match with percentage of ownership?
maglib
Level 10

My father and I co-own a rental property together. It is a condominium that we rent out. How should we divvy up the rental income and tax/ interest deductions?

depreciation of the rental must match ownership percentage of the asset...  Who paid for the asset.  Deductions follow the cash... You can't just make up the %, it is based on who paid.
**I don't work for TT. Just trying to help. All the best.
***Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
maglib
Level 10

My father and I co-own a rental property together. It is a condominium that we rent out. How should we divvy up the rental income and tax/ interest deductions?

depreciation on the rental matches ownership as that's how you purchased it and it's your cost basis.  If it's not, then the property would have to be gifted to you in order to depreciate an asset. You would get the lower of the FMV or basis of the other owner to depreciate over the rest of the useful life.  You can not just change depreciation without gifting assets to other person.  I own a property 50/50, I buy an asset and do not bill the other party nor do I gift it to them, the depreciation is mine to take then.
**I don't work for TT. Just trying to help. All the best.
***Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
TB50
New Member

My father and I co-own a rental property together. It is a condominium that we rent out. How should we divvy up the rental income and tax/ interest deductions?

This is my first year co-owner of rental property.  However the property management only give 1099-MISC to my partner only.  So we can't split the rental income 50/50 for 2019.  That mean, my partner will have to report all rental income solely.  At the same time she can depreciate the property on her return.  We have requested property management firm to split the income and issue in two separate 1099-MISC.  In this case, how can we claim the depreciation, knowing my partner has already started for 2019?

KrisD15
Expert Alumni

My father and I co-own a rental property together. It is a condominium that we rent out. How should we divvy up the rental income and tax/ interest deductions?

Have the other owner report the 1099-MISC and also report 50% of that income as an expense to you. 

Each claim half the income and half the expenses. 

Depreciation starts the year you purchased half the rental and would be based on your purchase price for your half and her basis on her Schedule E is her cost for her half.

Report half on each return, do not have her claim the entire rental. 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Carl
Level 15

My father and I co-own a rental property together. It is a condominium that we rent out. How should we divvy up the rental income and tax/ interest deductions?

My father and I co-own a rental property together.

So in reality, you have a partnership.

While the program as well as tax law does allow for "splitting" the ownership of rental property among two or more owners that are not married to each other and filing a joint return, it only allows you to split "EVERYTHING" equally when you report it that way on the personal 1040 tax return. So if you claim 50% ownership you can't claim 100% of the mortgage interest and then say, 50% of the rental income. When it comes to the split on the personal tax return, it's all or nothing.

Your lives will be a whole lot easier if you report the rental income and expenses on a 1065 Partnership return. so that things are reported for and as the partnership you legally have here.

 

maglib
Level 10

My father and I co-own a rental property together. It is a condominium that we rent out. How should we divvy up the rental income and tax/ interest deductions?

we get around that by entering our share and not allowing the program to alllocate our % ownership.  There is no way both partners have same auto and travel costs, meals, supplies, computers...etc.  We also depreciate all the assets and the other owner expenses them as we are in different tax situations.

**I don't work for TT. Just trying to help. All the best.
***Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

About Community

Learn about taxes, budgeting, saving, borrowing, reducing debt, investing, and planning for retirement.

3.46m
Members

2.57m
Discussions

Manage cookies
v