Co-owned rental property: how each owner reports income and expenses

The share rule

Publication 527 says that if you own part of a rental, you can deduct the expenses you paid according to your percentage of ownership. A co-owner who owns 40% reports 40% of the rent and deducts the expenses that belong to a 40% share. The publication also covers a shared mortgage: if you received Form 1098 as a co-borrower, you report your share of the interest on Schedule E, line 13.

This describes co-owners who hold property directly. If the group formed an LLC taxed as a partnership, the partnership files its own return, covered in our guide to Form 1065 for a multi-member rental LLC. Which one applies depends on how the property is held, which is a question for your preparer or attorney.

When one owner pays more than their share

The easiest problem to create is one owner paying the whole property tax bill from a personal account. Decide in writing how shared costs are paid: from a joint rental account, or by each owner paying their share. If one owner pays more than their share, record the extra as a loan or contribution to the property so each owner's numbers still match their percentage.

Example a made-up duplex is owned 60% and 40% by two siblings. Rent for the year is $30,000 and a combined $12,000 of expenses. Owner A reports 60% x $30,000 = $18,000 of rent and 60% x $12,000 = $7,200 of expenses. Owner B reports $12,000 of rent and $4,800 of expenses. Together that is $30,000 and $12,000.

Books everyone can read

• One bank account for the property, with every owner able to see activity.
• A monthly statement showing income, expenses and each owner's share.
• Distributions in proportion to ownership, unless the agreement says otherwise.
• A written agreement on who pays for big repairs, and how.

A one page agreement that prevents fights

Rental money fights between co-owners are usually about who paid what. A one page agreement settles most of them before they start. It does not need a lawyer to be useful, though a lawyer can tell you how it fits your state.

• Each owner's percentage.
• Which account the rent goes to and who can see it.
• Who approves repairs above a set amount.
• How shortfalls are covered: equally, by percentage, or as a loan from the owner who covers it.
• What happens if one owner wants to sell their share.

Review it once a year when you prepare the tax information, and update it when ownership changes.

Questions to bring to your tax preparer

• Do we hold the property directly, or does the way we hold it call for a partnership return?
• How do we treat one owner paying more than their share?
• How should the mortgage interest be split between co-borrowers?
• What happens to depreciation if one owner sells their share?

How DoorKeeping handles it

DoorKeeping keeps one set of books per property, with owner statements you can share with co-owners and your preparer. It does not file tax returns or decide how your ownership is taxed. DoorKeeping gives no tax advice. Your tax preparer decides how a rule applies to you, and your state may add its own rules.

Sources

1. IRS, Publication 527, Residential Rental Property, read Oct 30, 2026
2. IRS, Instructions for Schedule E (Form 1040), 2025, read Oct 30, 2026

Questions

Can I deduct all of the expenses if I paid them all?

Publication 527 says you deduct expenses you paid according to your percentage of ownership. Treat the extra as a loan or contribution and ask your preparer.

Where does my share of the mortgage interest go?

Publication 527 says to report your share on Schedule E line 13 when a co-borrower received Form 1098.

Do co-owners each file a Schedule E?

Generally each owner reports their own share on their own return. A partnership files its own return.