Why sign in to the Community?

  • Submit a question
  • Check your notifications
Sign in to the Community or Sign in to TurboTax and start working on your taxes
Level 2
posted Apr 13, 2022 2:23:13 PM

Rental Property split between three siblings

We have a 2 family rental property (owned by 3 siblings), we rent one floor to a tenant and the other floor is occupied by me.  

How do I calculate the depreciation I would take on this property? 

 

0 4 2537
4 Replies
Level 15
Apr 13, 2022 2:39:17 PM

Do you pay rent to the other 2 siblings for the unit you are living in?

 

Level 2
Apr 13, 2022 2:46:16 PM

No, I don't pay rent to them. 

Level 15
Apr 13, 2022 3:29:13 PM

There are several ways to do this, I'm only going to cover the way I recommend.

The overall best way (my opinion) is to treat the rented unit "as if" it was it's own physically separate property. That means mortgage interest, property taxes and insurance along with depreciation would be split for the "personal use" unit and the rental unit. Then assuming utilities are metered separately for each unit, all other expenses that are 100% related only to the rented portion, would be 100% rental expense.

Since there are more than two owners, reporting this rental on a 1065 partnership return would make any future changes easy. With a partnership return, all rental property income/expenses/depreciation would be entered on one single 1065 tax return and each partner/owner would be issued a K-1 reflecting their share of income/expenses based on their percentage of ownership. That K-1 would be needed for each partner to complete their own personal 1040 tax return.

To complete a 1065 Parnership return would required the purchase of TurboTax Business (different from Home & Business). TurboTax Business is not available as an online product or for MACs. It's for the Windows operating system only.

 

Level 15
Apr 13, 2022 4:07:50 PM

Irrespective of the merits and drawbacks to reporting a rental that is owned by three siblings on Form 1065 (as a partnership), now (the 2021 tax year) would not exactly be a good time to do so.

 

The 1065 would not be timely filed (it was due on March 15th) and penalties could be assessed as a result.