Receiving Section 8 Voucher in Co-owned properties

[Christopher Freeman]

I am about to close on two properties where there are currently Section 8 renters. For lending reasons, both properties will be co-owned (JTIC). Our local section 8 housing office has advised that they can only make out one voucher check, and are requesting a W9 for whoever should be receiving the income. This is stupid as we will be splitting the income (schedule E will be allocated 50/50).

The office also suggested that they could send the voucher check directly to the tenant. However, we know from the current owner on one of the properties that the tenant was chronically late when she was receiving a direct subsidy.

Has anyone else experienced a situation like this? How would you handle it?

[Sunny Hon]

@Christopher Freeman

Hello,

If you want to allocate the interest differently for tax purposes (such as your proposal that you want to split the income 50/50), it's possible to do so, but it involves quite a bit of paperwork. The person who received the 1099-INT needs to file Form 1040 Schedule B and subtract the amount of interest that should "belong" to the other person as a "Nominee Distribution", and then issue their own 1099-INT to the other person for that amount of interest, so that the other person can appropriately list it on their own return. For details, see the section on "Nominee distributions" in Publication 550. I hope this helps!

Sunny