Joint tenancy is a form of real estate ownership wherein two people jointly purchase a property with the intention of splitting everything fifty-fifty.
To illustrate the above, suppose an investment property is purchased and one party pays for 80 per cent of the deposit and expenses, while the other covers the balance. When tax time comes, the two parties have to claim 50 per cent of the expenses and 50 per cent of the income on their respective statements. It does not matter that one paid proportionately more than the other. This is what joint tenancy is all about.
In the case of a husband and wife, suppose an investment property is purchased jointly for $280,000 and the husband pays $100,000 down as a deposit. Even though he paid for 35 per cent of the property outright, all income and expenses must be declared evenly on their tax returns.
While the above situation would disadvantage the husband if he were in a higher tax bracket initially, over time when the property becomes cash positive it may turn advantageous. This is because 50 per cent of the income will be taxed at the wife’s lower rate.
Another facet of joint tenancy is what happens when one partner dies. In such a case, the property automatically reverts to the full ownership of the other party. So one’s interest in the property cannot be willed to a third party, as in the case of a tenancy in common
If you have a question about real estate, or would like assistance in locating a property, feel free to phone me, Noel Thompson Principal Professionals Logan Lifestyles anytime on 0418 517 525.