10% Vacation Loan Use and Tax Benefits

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10% Vacation Loan Use and Tax Benefits

Nicholas Kania
Member since 2024 · 10 posts · 5 votes

All,

It is my understanding that I can not use a 10% second home loan and put it in an LLC to reap the tax benefits if I STR the property most of the time. I am wondering if I create an LLC to use as a managment company and use the tax benefits created within that. Does this make any sense? I get that I will not be able to depreciate the house under the LLC but will I if it is for "personal use" but use the monies to furnish and manage the property at least I will have that.

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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
2y

Being in an LLC has ZERO tax benefits. It doesn't create tax deductible expenses you don't already have.

You CANNOT depreciate the house if it’s for personal use, ONLY if it’s a rental use. 

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  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    2y

    Being in an LLC has ZERO tax benefits. It doesn't create tax deductible expenses you don't already have.

    You CANNOT depreciate the house if it’s for personal use, ONLY if it’s a rental use. 

    2Reply
  • Nicholas Kania
    OP
    Member since 2024 · 10 posts · 5 votes
    2y
    Quote from @Bill B.:

    Being in an LLC has ZERO tax benefits. It doesn't create tax deductible expenses you don't already have.

    You CANNOT depreciate the house if it’s for personal use, ONLY if it’s a rental use.

    So I can still depreciate the house, write off items I buy to furnish the home, maintain the home, and any costs associated with running it as an AirBnB when I am not using it for personal use? 
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  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    2y

    Yup. 

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  • Nicholas Kania
    OP
    Member since 2024 · 10 posts · 5 votes
    2y
    Quote from @Bill B.:

    Yup. 


    Thanks! And it doesn't have to be within an LLC?

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  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    2y

    Nope. 99% of LLC's ar "disregarded" and have tax impact. 1% file their own taxes and cause you to pay higher tax totals.

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  • Michael PlaksPro Member
    Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
    2y
    Quote from @Nicholas Kania:

    It is my understanding that I can not use a 10% second home loan and put it in an LLC to reap the tax benefits if I STR the property most of the time.

    This question is confusing.

    1. When you take a loan - any loan! - you have a question of whether you can deduct interest on that loan. The answer depends on how you use the money. If you use the money for personal purposes, as opposed to business purposes, the interest on this loan is never deductible, period.

    2. A completely separate issue you hint at is whether you can have tax benefits from an STR that you also use for yourself sometimes. It depends on how much you use it personally. For tax purposes, you are better off if you do NOT exceed the larger of
    a. 14 days of personal use per year
    b. 10% of the days it is rented as an STR (example: if it's rented for 300 days, you have 30 days of personal use before you lose tax benefits)


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  • Nicholas Kania
    OP
    Member since 2024 · 10 posts · 5 votes
    2y

    I would be under that usage, no question.

    Where do the write offs come in then if I do not have the property in an LLC?

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    2y

    You can depreciate even with the personal use. However, the losses will be limited. That is why you need to consider your house's personal uses.

    Your strategy with LLC is not going to work. LLC will not give you any more tax savings than you'd get without the LLC.

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