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My partner and I (unmarried) recently bought a house in Seattle, and are planning to rent out the finished basement for extra income using Airbnb. The city requires us to register for a business license, which will be in one name only, unless we choose to form a partnership or LLC. We are trying to decide whose name it should be in (and who should receive the income from Airbnb). We are both on the title to the house, and the mortgage is in both names.

Here is our rough financial situation. (We both had a one-time stock vesting event from an employer this year, which will not repeat in future years.)

Me My partner
Annual base income from full-time employment $225,000 $175,000
2022 income from stock grant (one-time) $575,000 $325,000
Expected future annual income from stock grants None $60,000
Monthly payments towards mortgage $4600 $2300
Monthly expenses $2000 $2000

We don’t have much in the way of deductions and have both been using the standard deduction.

Of the mortgage payments, about $3000/month is currently going towards interest. We are first time homeowners so should be able to deduct interest paid.

We expect that we can get around $3000/month of rental income. Who should make this income & report it on their taxes? Would there any reason for us to bother forming a partnership or LLC for this purpose?

  • It seems like the person who normally makes more income could benefit more from possible business expense deductions.
  • …on the other hand, the person who normally makes less income from employment might be taxed less on the additional rental income.

We welcome any advice as well as additional questions that could help clarify the situation!

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    I may be misunderstanding your situation, but haven't you already formed the partnership?
    – littleadv
    Jul 9 at 1:00
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    "not legal business partner" - but you are. You bought a property together and intend to rent it out. You don't own the property on your own, neither does your partner - you own it together. Hence - partnership. Not sure what you think "legal business partner" looks like, but look in the mirror to see one.
    – littleadv
    Jul 9 at 2:29
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    "we still need to write one person’s name down to receive the income" - citation needed. Says who? "we still need to file separate tax returns because we are not married" - yes, but you can file a partnership return for the partnership income and only report your portions on your individual returns. That's how partnerships generally do taxes in the US.
    – littleadv
    Jul 9 at 6:16
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    @shoover It would need an egress window.
    – mkennedy
    Jul 10 at 0:54
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    @mkennedy Just making sure that OP is aware there may be things to think about other than the financials.
    – shoover
    Jul 10 at 1:59

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