Question:
Dear Tax Talk,
In 2004, my then-girlfriend and I purchased a house in both of our names. (Bad idea, I know.) We are no longer together. In fact, she has since been married. She and her husband have been living in the house. She has been claiming the house on her taxes since we purchased it.
But she and her husband have just purchased another home and plan to move into it. Selling the house she and I bought together isn't an option, as it is underwater. So the plan is to rent it out. I will begin claiming the house on my taxes as a rental property. As a result, the rent payments will now be considered income, offset by expenses and interest. Neither I nor my ex-girlfriend want full ownership. Fortunately, we have an amicable friendship.
The problem is, I don't know what I need to do regarding claiming the house on my taxes rather than hers. Any help would be greatly appreciated.
-- Travis
Answer:
Dear Travis,
I'm not sure why you're getting saddled with the negative equity, but maybe you're just being nice. You'll need to report the rental activity on Schedule E for the year that you commence the rental of the property. Ideally, you would like the lender to report the amount of mortgage interest you pay in your name and Social Security number. Confirm this with the lender before the end of the year by asking them to make the necessary changes in their system to IRS Form 1098.
