How should you report income on a co-owned rental property?

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Q. My spouse and I co-own two rental properties. Can we claim the rental income 50/50 on our tax returns? I would assume the answer is yes. However, when looking back at our returns for the last few years, I noticed that the “professional” doing the returns didn’t allocate it this way. Is there any circumstance that would allow it not to be a 50/50 split? I can’t find any specific information on the Canada Revenue Agency website that seems to address this. Any information you could give me would be greatly appreciated. –Marie A. This is great question Marie, and one I am asked every tax season. A rental property is a great way to build wealth. Serious wealth-builders will tell you that buying a rental property with a mortgage and having others pay down the mortgage is a smart strategy. The ownership of the property can be in the form of a co-ownership or a partnership that is not necessarily 50/50, but instead is in proportion to each owners’ investment in the property. Be sure to retain all documents that show the ownership percentages for your property throughout the duration of your ownership. As you and your spouse are co-owners of the property, you both must report your share of the rental income or loss for the calendar year in proportion to your ownership. Your rental income must be reported in the same proportion every year unless there is a change in the proportion of ownership. Capital Cost Allowance (CCA) is the Canada Revenue Agency (CRA) buzzword for depreciation. You are allowed to claim CCA on your rental property assets. The rate of CCA differs for different classes of assets, and your accountant can assist you in deciding which classes your particular assets fall into. There are some fine points in regards to CCA that you should be aware of. First, if you claim CCA, it must be in the same proportion as your ownership. Second, claiming CCA is not mandatory and there may be some reasons you don’t want to claim it, such as the reduction of the adjusted cost base (ACB) of your property, which could affect your taxes payable in the future. That’s because CCA reduces your ACB, and therefore increases the capital gains when you sell. You can discuss this with your accountant to see what effect it would have on your taxes payable. Third, you cannot create or increase a rental loss with CCA; and, finally, always complete the CCA schedule on your tax return for additions because even if you don’t claim the CCA, it will help you track the value of your capital expenditures on the property. Theresa Morley, CAP, CA, is a partner with Morley Chartered Accountants in Barrie, Ont. She blogs at MorleyCPA.

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Tara Bankley says:

January 7, 2021 at 8:44 pm

Im not yet divorced but my soon to be ex is collectingall the retal income every month and not giving me my share. IS THIS LEGAL

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1. MoneySense Editors says:
  
  January 11, 2021 at 3:14 pm
  
  Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
  
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Mariana A. says:

March 25, 2021 at 11:46 am

HI , I what to ask if in principal residence renting the basement co-owner 50/50 , how do we report the rental revenue in T772, it split automaticaly the total income or you have tp split? than about expense only one claim it or you split 50 /50 , ( each coowner claim half of expense?)

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1. MoneySense Editors says:
  
  April 6, 2021 at 8:35 am
  
  Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [email protected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.
  
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Jennifer Bell says:

May 26, 2021 at 11:02 am

I too feel that it was a good question, but you provided an incomplete answer. Assuming that if she and her spouse owned different percentages of the property, and those were the percentages the tax preparer used in calculating the division of rental income, she would understand why it was done and would not be asking this question in the first place.

SO – assuming they own the properties as spouses, and the ownership is 50%/50%, then is there any legal reason that the income can be divided any differently than 50%/50%? Or has the professional she hired done something that is incorrect?

To take that question one step further, if the professional did make a mistake, could she and her spouse get in trouble down the road for a mistake that was made by a professional they hired?

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Keith Kennedy says:

April 17, 2022 at 9:38 pm

Hi
My spouse and I purchased and have leased out a rental property [Nice 4Br 3Ba House on 1 ac of land] in the USA since Feb 2019. Sale price and land value in US$ we know as of that time. in 2019, the cost of house minus land – split into 2 for each of us – was over CA$ 250k each so we each declared that on our T1135s.
However, is this the same as UCC – or is it a value including the land?
We assume we should list the value on each of our T1165s as 1/2 of the total and that it should be in CA$ – or can it stay in US$ as it was purchased?
Does that value change each year according to
– the BoC annual average exchange rate or
– according to an appraisal so if it increases in value – we should list that new value?

Thanks

We had rental income from it so we declared that on the T1135 – correctly

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1. MoneySense Editors says:
  
  April 19, 2022 at 5:13 pm
  
  Thank you for the question. We invite you to email it to [email protected], where it will be considered for future articles.
  
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