Need help on question I received from my client.
My wife doesn’t work, the only income she receives his half of the rental income which was $15,000 in 2022 ; 1/2 of $30,000. Since I’m the one paying all of the expenses related to our income property. Could I declare all expenses under my income, instead of sharing the expenses that we deducted? The goal would be to reduce my taxable income.
No. You cannot do that.
The revenue and the expenses are not separate. You report the revenue AND the expenses on a form T776 and the net rental income is split between you and your spouse.
How about splitting the net income on the basis (%) of the work done if in the partnership agreement.
Be wary of a “Partnership” for UHT reporting purposes however.
And if the seed money for the property came all from you, you can’t even split the income 50/50. It should all be reported as income by you.
Blanket statements shouldn’t be made. A spouse that is active in the rental should have some of the income (after expenses) allocated to them. If one spouse put in the money but the other spouse is doing all the work then it may be appropriate to split the income evenly, or even weight it towards the active spouse (IMO the investing spouse should still be showing a reasonable return, but other practitioners may be more aggressive).
I would agree with you that you should not make blanket statements. But I was referring to this particular case. This is why I started the phrase with “And if…”
Sorry, as a practitioner I wouldn’t buy the argument that much work is involved.
$30,000 rental income [gross amount]? That is one property. I would ask the client what it means “doing all the work”. How many hours are involved?
Most expenses would be property tax, mortgage interest and utilities.
It is called passive income for a reason.