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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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My partner and I share a house. I am the homeowner, but he

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My partner and I share a house. I am the homeowner, but he pays 1/2 of the mortgage and utilities. He has a small business he does out of the home and deducts the mortgage and utility payments to me as business expenses. Since he does that, I've been putting those payments on my tax returns as rental income. Is that what I've should be doing or, since this payment goes directly for housing expenses, do I really need to count it as rental income?
Submitted: 5 years ago.
Category: Tax
Expert:  Merlo replied 5 years ago.

Hello greg,

 

There are a couple of issues here. The first thing is that if the money that your partner is paying to you is because he lives in the home, then he really should not be deducting those expenses as business expense. Even though he may be conducting his business from home, since he is not the homeowner, he is not allowed a business deduction for those payments. First of all, deductions for business use of home are limited to only the actual percentage of your home that is used for business. Just using a simple example, if you own a 5 room home and have one room that is dedicated as an office which you use for business, then you could claim 20% of certain home expenses as being business related, but you could not claim the entire amount of your expenses. When you rent property, which is basically what your partner is doing here since he is not the homeowner of record, the most he could deduct would be a percentage of what he pays you for rent and utilities, and he would have to be using one area in your home exclusively for business, or the deduction is not allowed.

 

As far as the money you are receiving from him from rental, you are correct in reporting this as income on your own tax return.

 

If this has been helpful please press the Accept button. Positive feedback is also appreciated.

 

Thank you.

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 3 other Tax Specialists are ready to help you
Customer: replied 5 years ago.

Merlo;

 

I should have said that he only takes a percentage of the "rent" payment. He has 1 room dedicated as his office and has done all the calculations.

 

Thanks for the quick response! I appreciate the help

Expert:  Merlo replied 5 years ago.
Thanks greg, and thanks for using JA
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 3 other Tax Specialists are ready to help you

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