Hi,
My mom and I own a condo. My name is on the mortgage. Both our names are on the title. My mom lives in the Condo and we rented out 50% of the condo. The condo is a two bedroom, two bathroom unit. All expense are split 50-50 as well as the income from the rental. How do we go about filing?
Is this still consider a single family home rental unit?
How do we divide up the mortgage interest and property tax? Can one of us claim it all?
Does the rental expense have to be divided between us or can one call it all?
Thank you for the help.
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Is it possible to edit my post to correct errors and clarify information? I have been searching the forum and the help section with no luck.
Go to your question and click the three little blue dots on the upper right--you can choose edit and change/edit your question.
You will each report your portion of the rental income and expenses on your own tax returns on the Sch E ... make sure you don't double count anything. I suggest you make a spreadsheet for both of you to make it easier. Each of you will depreciate your portion of the home.
Thank you. I did not see it on my mobile device. I see it on my computer now.
The depreciation. Are we depreciating 50% (25% for my mother and 25% for myself) of the condo because we are renting out only half of it?
Does that go for any repairs, upgrades, replacement for the condo?
Thank you.
Correct ... you are renting out 1/2 so you each get 1/4 for depreciation ... just think logically. Do some reading : https://www.irs.gov/forms-pubs/about-publication-527
First you need to decide if you have a rental situation or only a room mate situation.
If this is merely a cost sharing arrangement where the amount paid is below fair market rental, there would be no reportable income to you. If the “rent” amount is fair market value, or more, there is still some question as to whether you even have to report it, as it almost always comes out zero. Most people take the attitude that it is not income; it's just room mates sharing expenses and ignore it. Family, as opposed to unrelated roommates, makes that position stronger.
Here’s what you may be required to do:
Report the income (enter at Rents & Royalties/Income & expenses from Rental Properties); and then deduct the expenses on schedule E. If the room mate has full run of the house, and there's just the 2 of you, then half your expenses are deductible (mortgage interest, property taxes, insurance, utilities, repairs, and depreciation [if needed}). Your net income will usually be less than zero.
What you are NOT allowed to do, because it is your own home (you have "personal use") is claim a loss from this activity, to offset other income. Because of the "personal use rule", your deductions are limited to your income. Net effect ZERO.
TurboTax (TT) does not handle this properly. TT will not limit your deductions to your income. You have to do that manually. TT wants you to enter this as a “not for profit rental”, which does not use Schedule E and puts your expenses on Schedule A (itemized deduction). I'm of the opinion that's not the proper way.
As to who reports it, you follow the money. Since all expense are split 50-50 as well as the income from the rental, you each report half. The comment about personal use applies to you as well, since you are allowing a family member to live in "your half".
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