Hi
I’m wondering if anyone can provide their tax opinion on the following example:
A is married to B.
A earns a salary; B is a home maker (nil salary)
A and B are joint tenant owners, 50:50.
A will make the mortgage / interest repayments.I understand that A and B would split the rental income 50:50.
However, what about the tax deduction for interest expense? I can think there’s only two main ways it might be treated:
1) the interest deduction is split 50:50 between A and B even though A is paying for it; or
2) Person A gets a 50% deduction for the interest paid and B gets nil as no contribution.I’m pretty sure it wouldn’t be that A get’s a 100% deduction on the interest while splitting rental income 50:50.
Any ideas?
I believe the expenses must be shared in the same % as the ownership of the property.
So if B has no income the deductions may make an overall loss. This loss may be able to be carried forward to future years and it may get larger and larger for many years until the property would be become cashflow positive. Then the income would be offset against the loss until it is all used up.
This may have been avoided if you had used a hybrid discretionary trust structure – could have saved you a bit more tax a long the way.
Terryw
Discover Home Loans
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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