Claiming Taxes and expenses with a business partner

5 Replies

Hi All!,

My business partner (friend) and I have closed on three properties this year. We are simply 50/50 owners of each property and do not have an LLC. My question is when we claim expenses for the properties will this affect us or will it just be we each get to claim 50% ? We have a joint checking account for which all bills/expenses are paid out of and income taken in is deposited. We keep very detailed records but I'm not sure how this will work come tax time. Does anyone have experience with this type of situation?

Thank you,

Pat 

You will each get to claim 50% of expenses, and pick up 50% of income. Just continue paying all expenses from the joint account, and keep good records, and you will be fine.

Hi Lance,

I appreciate the advice. I was not sure if we needed an LLC or legal partnership. How we operate now is that our tenants actually pay our property management company and then the management company pays into our joint checking account. So when tax time comes, do we file our own separate returns? And we would each claim 50% of income and 50% of taxes as part of our own individual tax return? Sorry if these are bad questions but this is the first tax year in wich I have had to prepare for this secenario.

All the best,

Pat

Tell your property manager you both need a 1099-misc issued for your half the rental income received. If the partners collected a total of $12,000 in rent, but it is all posted on one 1099-misc to @Patrick Dundon , then the IRS naturally assumes Patrick Dundon is paying all the tax on it. The property manager should issue you each a 1099-misc for $6,000. 

It can be sorted at tax time if they don't, but it adds some extra hassles. Get out ahead of this now with your manager.

Best of Luck!

Hi @Lance Lvoskly and @ Paul Allen,

Thank you both for the advice. Another concern/ issue I have is out partnership. We own one property and have mortgages on the other two. Like I said we are 50/50 on everything. We carry a million dollar coverage policy on each rental and we have our own umbrella policy's. Should we have a legal partnership created at this point and if we did, could we even put the properties with loans into an LLC with them calling the loan?

Appreciate and advice,

Pat