BiggerPockets

It is going to really depend on your state's property tax laws and the appreciation in value of your home.

If your state has a homestead exemption on property tax, then your llc is not going to qualify for homestead exemption. So your property tax bill will be higher.

You will not qualify for Section 121 Capital Gains Exclusion on your primary residence if your LLC owns the house. You will have to depreciate the house over 23.5 years, but this amount will be recaptured at 25% when you sell. You can do a 1031 exchange, but pay the extra fees, while it would have been tax free for nothing in your own name.

Your property insurance will most likely be higher as you have to pay for a landlord policy owned by the llc and a renters policy in your name.

The yearly fees and taxes on the llc will add up depending upon the state that you are located. The additional paperwork and forms will add up. Depending on where you live, the local jurisdiction may require your llc to have a business license and pay more taxes.

Unless your house is free and clear, it would violated Due on Sale clause. Yes not likely to be invoked now, but it is a possibility.

Asset protection this will be neutral unless the LLC has another member besides you.

I don't see how you would deduct utilities unless they were provided in the rent. The IRS will want to make sure this is a true market rent if they figure out you are renting to yourself.

In summary, I don't think the tax savings in deductions would outweigh what I have listed unless you think your market will not appreciate. If you think that, then you are better off just renting from someone else anyway.

My goal was to legally expense the expenses of my primary residence. I calculated my primary just like I calculate a rental so I know how much it's costing me out of pocket per month and last week I was thinking that it would be nice if I could set it up so that the house is owned by a company and I rent from the company so all the expenses related to owing the home are tax deductible except for the renters insurance I would carry for the contents.

I also thought it might improve asset protection a bit.

-Michael

The question for your accountant is not to ask, " Is this legal?" The question is more, " How can this be done so it's legal? Do some out of the box thinking."

Thanks Richard. I that was the reason I was looking for to not do it.

-Michael

One problem with that the house must have been your primary residence for 2 of the last 5 years. You will also have recapture on any depreciation that you claimed. If the IRS initiates an audit and found that the transfer was done to avoid taxes in a fraudulent manner you are in for a world of trouble.

8)

There's nothing illegal about it it's just that you have to weigh the pros and the cons, and Richard pointed out a con that for me out weighs the pros.

Just when you're ready to put it on the market, buy the home from the LLC. That way, you would be selling your primary residence and can take the tax exclusion.

Best of both worlds.

Moving a house into an LLC isn't that hard, moving it out however is a little different and what you are talking about would be borderline illegal. It's also not the brightest move in the book because an 1031 would do it legally.

-Michael