Real Estate

How rental income tax is divided for multiple owners?

  • Last Updated:
  • Dec 11th, 2017 8:24 pm
Deal Addict
Mar 20, 2017
1370 posts
1165 upvotes

How rental income tax is divided for multiple owners?

The case:
Husband and spouse own property with shares 99% and 1%.
Majority of rental income is received on spouse's bank account.

For tax purposes, is it fair to say that spouse has most of the rental income and should pay taxes under her marginal tax bracket?
Or CRA is forcing to make it 50%/50% or 99%/1%? What are the rules?
4 replies
Deal Addict
Nov 22, 2004
1621 posts
766 upvotes
GTA
Divide the income/expense with the same proportion as the ownership. Generally the division is 50/50, but if you have had a different structure (i.e. 99/1 for tax optimization), you'd use that for your respective tax accounts.

Not sure what tax software you use but with TurboTax, it would ask the partners' names and their shares, followed by the income earned and expenses incurred. Then it would calculate the taxable portion accordingly.

It's best to remain consistent with a structure (unless things change). For ex: if you've decided on a 99/1 structure, then stick with that instead of making it 50/50 the following year, then 1/99 the year after. Inconsistencies are more likely to be flagged and enquired upon.
CPA. Realtor.
Banned
Sep 19, 2012
1253 posts
1867 upvotes
Calgary
GalvToronto wrote: The case:
Husband and spouse own property with shares 99% and 1%.
Majority of rental income is received on spouse's bank account.

For tax purposes, is it fair to say that spouse has most of the rental income and should pay taxes under her marginal tax bracket?
Or CRA is forcing to make it 50%/50% or 99%/1%? What are the rules?
Technically it's based on the source of the money used to purchase the rental property. If property was purchased with 99% husband's money, then a 99%/1% split is appropriate. If it was 50% husband's money, and 50% spouse's money, then 50/50 is appropriate. Practically speaking, you can probably go with "99% and 1%" if that's how the property is "owned" (knowing that it's not the technically correct answer).
Nikola Alaica, CPA, CA | Tax, Accounting, Mortgages
Deal Fanatic
Nov 2, 2005
5355 posts
2721 upvotes
WFH
If you plan to attribute 99% of the income to your spouse you better have the paper trail to prove that she put down 99% of the investment from her own funds.

50/50, no one will bat an eyelid but 99/1, be prepared to answer to an audit.
Deal Expert
User avatar
Jun 12, 2007
20807 posts
6623 upvotes
London
At what point does attribution rules for spouses factor in ? (i.e. high earner spouse is 100% unless you can prove the low earner is is x% claimed)

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)