Renting with partial ownership but paying 100% of the costs

Forum|Forum|7 years ago
January 17, 2019
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I own a condo with my husband and 3 kids that we bought when they were in college. One of my kids still lives there and she has two roommates since last year. My husband and I have paid the mortgage, taxes and all the expenses and take the rental income from my daughters 2 roommates. Do we depreciate 40 % of the property as if we are renting out our 40% share? We also replaced all the flooring with carpet and laminate and paid 100% of that cost. How do we treat that expense.

Carl11_2

Employee

I own a condo with my husband and 3 kids that we bought when they were in college.

So there are 5 owners?

Do we depreciate 40 % of the property as if we are renting out our 40% share?

If "we" in the above sentence is only you and your husband, and if there are 5 owners, then you only have 40% ownership together and that's the value you depreciate. How you figure that 40%, depends on who paid what.

For example, if you and your husband paid 100% of the price of the house (or are paying 100% of the mortgage on the house) then you will enter the total price of the house while claiming only 40% business use for "your share" of what you own. Yes, you may have paid 100% of the costs. But if there are 5 owners listed on the deed, then each owner owns 20% and each owner can only "control" their 20%.

My husband and I have paid the mortgage, taxes and all the expenses and take the rental income from my daughters 2 roommates.

So your husband and you will claim 100% of the expenses since you actually paid it.

We also replaced all the flooring with carpet and laminate and paid 100% of that cost. How do we treat that expense.

New flooring and carpet is not an expense. It's a property improvement that must be entered as such and depreciated over time. If this was throughout the entire house, then you own 100% of that particular asset. While you will enter the asset cost as 100% of what you paid, you will only depreciate that percentage of it that is actual rental use by claiming only the appropriate percentage of business use for the asset. For example, if you have one daughter living in the house with two others and the two others are renters, then the business use percentage of that asset is 66%. The other 33% is being used for "personal use" by a property owner (your daughter) for whom do you do not charge rent for the use of the remaining 33%.

I am dreading when you sell this condo and have to report the sale. It can be done with TurboTax. But in your case you will "really" have to pay close attention to detail.