Home purchased by 2 (3 bd) home 1 lives there 2 rooms rented Income from rent to 1 who lives thereHow do you depreciate it in TurboTax?

Forum|Forum|3 years ago
April 6, 2023
3 replies
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Shared living 2/3 rented including common areas. Do both owners have to split income & expenses or can one take both income and expenses (including depreciation) even if both are on deed/and loan?

TurboTax Online

Carl11_2

Employee

Just work through the SCH E section of the program and read the screens. One of them has a selection for "I rent a part of my home". Select it, along with the other two items on that screen you'll need to select, and press on.

TomK2023

If both owners are legally obligated to make payments and both do make such payments, then you can enter your proportional shares accordingly.

Are both homeowners' names on the 1098 (for mortgage interest) and property taxes?

"Even though two unmarried individuals can both be the legal owners of the home and pay the mortgage equally or from common funds, the lender normally

sends out only one Form 1098, Mortgage Interest Statement. Additionally, the local taxing authority may also only provide a receipt in one taxpayer's name."

For example... "If each taxpayer paid one-half of the mortgage and real estate tax expenses, then each Schedule A [or Schedule E for the homeowner who is the Rentor] should reflect one-half as deductions. Both of you should attach a statement to your Schedules A [Schedule E] explaining how you're dividing the mortgage interest and payments of real estate taxes. Your housemate, who didn't receive the Form 1098, must list the mortgage interest he or she paid on Schedule A line 8b, "Home mortgage interest not reported to you on Form 1098."

IRS Other Deductions FAQ (splitting homeowners expenses)

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gspangler2-gmailAuthor

Hello Tom,

The home loan/deed is in my and my sons name. The interest statement is in his name.
He lived in the home during 2022. He rented two of the rooms and lived in the other. He actively manages the property.
Questions: Do we have to both report the income or just him since he is receiving it?
I am only passive on this property to help him get started.
With 2/3 of the house being a rental is depreciation in Turbo Tax going to be reflected correctly? Will he be able to use the depreciation only or does this have to be split? Do you count security deposits as income if you are giving them back at the end of the lease? Are items that are shared by the renters like the sofa and TV 2/3 deductible? Thank you again for your support, G

Carl11_2

Employee

Questions: Do we have to both report the income or just him since he is receiving it?
I am only passive on this property to help him get started.

I had what I think is a similar situation in my past. My parents co-signed the loan just so wife and I could get our first house. None of their money was involved with anything concerning the house. The down payment was 100% us (my wife and I) and we made all the payments. Basically, my parents had no "vested interest" in the property what-so-ever. Therefore, I claimed all the deductions on our joint tax return every year.

A few years later my wife and I bought another home on our own. Moved out of the first home and converted it to a rental. Again, my parents still had no vested interest in the property. So I claimed all the rental income/expenses/depreciation on the property, declaring 100% ownership since parents had no vested interest in the property still. Never had an issue with it.

A few years later we desired to remove my parents from the deed and of course, need the permission of the lender to do that. Lender would not give permission. No problem. Dipped into our savings, went to the bank to pay off the loan in full to the shock and surprise of the lender. Now all of a sudden, they are willing to give permission. Told the lender where they could shove it as I wrote the check. Parents then did a quit-claim and my wife and I are now the only owners of the property.

Overall, it would "appear" that you the parent, as the co-signer, really have no vested interest in the property. You merely wanted to help your son get started. I see no problem with your son claiming full ownership, along with all the rental stuff in-kind, provided he is the one dealing with it 100%. Since your son is the one listed first on the deed, and it's his SSN that appears on all the tax reporting documents (the 1098, property tax bill and any other stuff) it should be a non-issue.