Ok for rental co-owner and I to do 50/50 Schedule Es this year even though I claimed the whole thing last year?

[singlememberLLC7]

My unmarried partner and I co-own a rental property as joint tenants. Last year I filed a Sched E for ALL of the income, expenses, and depreciation since I did all the work for the rental (even though the rent payments were sent to my partner, but we kept a running spreadsheet of all of our shared household expenses + rental income and it tends to even out over time). The Sched E ended up showing about a $600 loss that year since the property only rented the last few months of the year and we had a big repair (which I paid for). I recently learned that we should actually EACH be filing a Schedule E for HALF of the income, expenses, and depreciation. If we do it the correct way this year, will that be a red flag/do we need to amend our returns from last year to split it 50/50 too? Or is it ok to just do it right going forward as long as I only claim half of the carried over depreciation/loss from last year? Or maybe I can still claim the whole thing?  (I'm guessing if he doesn't amend his previous return then he can't claim his half of the depreciation carry over this year) Many thanks!

[DavidD66]

You both need to amend your 2023 tax returns and each of you report half of everything related to the rental.  You can't just change your rental from 100 to 50%.  You will have to create a new asset that is 50% of the building and 5-% of the land.  Alternatively, you can file the rental on a Form 1065 Partnership return.  You will each get a K-1 every year to report the rental income or loss on your personal returns.  You will both need file amended returns if you file as a partnership.

[singlememberLLC7]

Thank you! So on this year's returns should we each carry over half of the loss from last year in anticipation of our previous returns being amended? Or is it better for my partner NOT to carry over any loss (since as far as the IRS knows he doesn't have a loss to carry over since his 2023 return hasn't yet been amended) ...but I could carry over half the loss (since until my amended 2023 return is processed, the IRS thinks I could carry over double that)? Thanks again

[PatriciaV]

Yes, the carryover loss should be allocated between the two owners using the same percentages as the income and expenses. This is the correct way to report the activity, since you are amending both returns.