I’m not sure if this is actually a real estate question, but it involves property so I’m posting here in hopes others might have advice.
My question is regarding how to divide tax vs. untaxed benefit in a jointly owned home. The facts: We co-own a 2 family property with my sister. We own 2/3, she owns 1/3 of the whole property. We pay 2/3 of all expenses, she pays 1/3. We live in one apartment. We rent the other unit. The apartment we live in has a market rent of $4000, but we only pay $2000 to live there. The rental apartment goes for $2000. My sister takes the $2000 of rental income, $1000 goes to her share PITI/etc, the other $1000 is income for her. We take $2000 as the unseen benefit of paying below market.
Sooo, everything is even-stephen, except that she has income to report and we do not. Of course, the $2000 we pay towards PITI is post-tax money. Also, she is out of state, so we do all the maintenance, sweat equity etc.
Is this fair? Is there another way we should be approaching this?