Dual property ownership claiming property & rental income
I own a property with someone I am not married to so we file our taxes separately. We live in one room & rent out a few others. Do we both have to claim the renters & house on our taxes or just one? It seems like if we both claim it we would be paying taxes on it & the rental income twice.
Answers
-
When you jointly own a rental property, you will divide your total income and expenses based on your ownership agreement. If you do not have a formal agreement, you can simply determine how much of the income and expenses apply to each owner.
You can then each file a Schedule E to report your share of the income and expenses. This will avoid double taxation of the funds and correctly report your rental activity.
Additionally, if you are renting out part of your home and have mixed use spaces (like a kitchen, living room or bathroom) you will need to prorate your expenses accordingly.You can use any reasonable method for dividing the expense. It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home.
You will then use this information to prorate your rental expenses.
