If my husband and I file separately, how do we handle the rental property that we own? Should we both claim the property? How do we divide expenses and income?

Forum|Forum|6 years ago
June 4, 2019
2 replies
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If we file separately, do we both claim the rental property as income? If so, do we both list expenses and rental income?

TurboTax Premier Online

DianeW777

If the rental property is in both names and you file separately you can split the rental income and all expenses in half if a joint account is used to receive rents and pay expenses. You could also decide to choose who will claim the rental property on their return.

If an account owned by only one of you is used for the rental activity and/or the rental is only in one of your names, that person should claim the rental activity.

If you live in a community property state, you will be required to provide additional information regarding your spouse’s income.

Community property states: AZ, CA, ID, LA, NV, NM, TX, WA, WI

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Sunroom25

Re: Sch E losses

By filing MFS, Can you claim losses on each return even if you lived together?Confused with Pub 927 that you have lived apart separately at all times during the year. Then who should claim the losses if they want to file separately?

Carl11_2

Employee

Basically, you split *EVERYTHING* right down the middle when filing MFS, assuming both parties own the rental property.

Be aware that when a married couple files separate returns, they both "automatically" lose a fair number of credits and deductions they would otherwise qualify for if they filed joint. So you'll both lose things like the EIC credit, the $25K rental loss against other ordinary income, any and all education credits and deductions, and quite a bit more will be lost or extremely limited.

Also, if one of you takes the standard deduction then both of you "must" take the standard deduction - even if itemized deductions would be higher for one of you.

If one of you itemizes deductions, then both of you "must" itemize deductions - even if the itemized deductions of one of you is ZERO.

Bottom line is, when you both file separate returns, your joint tax liability is going to be higher than it would be if you filed joint.

DiLarik

i understand that we can split "everything", but we prefer to report rental income/expenses on Sch. E by only one spouse. is it allowable for the rental property owned jointly?

Carl11_2

Employee

You most certainly can do that. But if you live in a community property state, then the other party will end up reporting and paying tax on half of the income on their own tax return anyway.