Write-off's when investing in real estate *not* as an LLC

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Write-off's when investing in real estate *not* as an LLC

Paula Rodriguez
Bronx, NY · Member since 2015 · 12 posts · 2 votes

Hey everyone,

If one does not form an LLC and still invests in RE continually under their own name can they still write off travel, hotel stays, meals, educational material, seminar attendance costs, purchase of a car, gasoline (fuel), mileage, car repair, parking, office supplies and office equipment, etc.?

Thank you.

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James Maher
Real Estate Investor · Campobello, SC · Member since 2015 · 74 posts · 11 votes
10y
Good questions. You are certainly able to deduct mortgage interest, taxes, etc. I'm not sure where your allowable deductions end though.
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  • James Maher
    Real Estate Investor · Campobello, SC · Member since 2015 · 74 posts · 11 votes
    10y
    Good questions. You are certainly able to deduct mortgage interest, taxes, etc. I'm not sure where your allowable deductions end though.
    1Reply
  • Chris K.Pro Member
    Investor · Baltimore, MD · Member since 2012 · 1k+ posts · 655 votes
    10y

    From what I've heard (of course you should verify with an accountant), having an LLC doesn't give you any tax advantages over not having one. Keep in mind all of my inquiries were based upon having a single member LLC.

    1Reply
  • Henry J.
    Monterey Park, CA · Member since 2014 · 157 posts · 80 votes
    10y
    Yes we have. We wrote off business laptop, printer, travel to see properties, and meals. Didn't use repair or car write off because we invest out of state. Check with your CPA to get details.
    1Reply
  • Paula Rodriguez
    OP
    Bronx, NY · Member since 2015 · 12 posts · 2 votes
    10y

    Thank you, all.

    @Chris K: That is exactly what I'm considering, a single member LLC.

    0Reply
  • Simon Shih
    Investor · Houston, TX · Member since 2012 · 354 posts · 186 votes
    10y

    Before you form an LLC @Paula Rodriguez, listen to podcast 109.

    1Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    10y

    @Paula Rodriguez you do not have to have a separate entity to have a "Business" as far as the IRS is concerned. Many businesses are run as sole proprietors.  If you have a business you can deduct expenses the are "ordinary and necessary" to run your business.

    When I was self employed in sales I deducted all of the things you mentioned. Keep in mind there are some specific limitations to some you  mentioned. You don't deduct the cost of a car for example. You depreciate it over a number of years. Meals are allowed as a travel expense, but you can't deduct lunches when you are driving between properties.

    1Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    10y

    The van I drive is a company van. Owned by an LLC for the benefit of the LLC. The LLC has 50 or so properties. The van is 100% for company use. As far as your list: "...can they still write off travel, hotel stays, meals, educational material, seminar attendance costs, purchase of a car, gasoline (fuel), mileage, car repair, parking, office supplies and office equipment, etc.?" I'm not an accountant, but "purchase of a car" and car related expenses would seem to be appropriate if you are (from a time or capital basis) 100% "in the business" and the vehicle is 100% used for business purposes. Realtors and brokers, 100% in the business, may be better poised to answer if 100% of their vehicles, travel, hotel stays, meals, educational material, seminar attendance costs, etc. are expenses on their taxes. @Steven Hamilton II probably has better insight.

    When I travel for company (the LLC) business, I don't expense hotel stays or meals because I stay in the property and I pack a lunch (company doesn't pay for meals) or buy stuff I would buy normally. Personal or LLC probably doesn't matter... except for multi-member LLCs. In that case I'd suggest staying in your Operating Agreement guidelines and not pissing off your other members with hotel bills and dinners.

    1Reply
  • Carlos Aguilar
    Wholesaler · Las Vegas, NV · Member since 2008 · 21 posts · 16 votes
    10y

    Paula,

    *Disclosure: I am not a cpa or attorney Please consult with a local professional. These are strictly expression of my opinion and not advise.*

    its important for any Real Estate investor to understand to why you should have an Limited Liability Corporation. Also , based on your question, it shouldn't matter if you do have an LLC or not. If you run your RE investments like a company for the sake of write offs, it shouldn't matter.

    However to maximize your write offs look in to an "S-corp". You can create a business account. but beware not to co mingling of monies.  Meaning, dont mix personal with business funds.  You place all your real estate gross earning in to your company that you own. Which then you then can pay your self a salary after all your deductions. The lesser amount could be tax rather the gross earnings. 

    Going back to LLC, If you own more than 1 or 2 homes in which you have renters , its vital to have an LLC under them. If you have a renter that slips and falls (as an example) they cant sue you directly, only the LLC(entity). Its a layer of protection that is vital for any real estate investor.

    Good luck ! 

    1Reply
  • Tom SpaethPro Member
    Investor · Denver , CO · Member since 2011 · 129 posts · 59 votes
    10y

    The only thing an LLC writes off that a sole proprietorship can't write of is the state fee to register the LLC. Any business no matter how structured can write off almost any legitimate expense. Of course it usually takes a CPA to figure out what is a legitimate expense.

    1Reply
  • Doug W.
    Flipper/Rehabber · Alexandria, VA · Member since 2014 · 461 posts · 262 votes
    10y

    Check out the IRS Schedule C; specifically Part 2 @Paula Rodriguez

    https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

    Some more info; see "Expenses" section: http://caps.fool.com/Blogs/schedule-c-what-expense...

    *I'm not a CPA, this isn't tax advice, yada yada 

    1Reply
  • Logan AllecBusiness Member
    Accountant · Los Angeles, CA · Member since 2014 · 1k+ posts · 980 votes
    10y
    Originally posted by @Tom Spaeth:

    The only thing an LLC writes off that a sole proprietorship can't write of is the state fee to register the LLC. Any business no matter how structured can write off almost any legitimate expense. Of course it usually takes a CPA to figure out what is a legitimate expense.

    Agree. There's a myth floating around there that putting up a single-member LLC will get you more tax benefits. It may be smart from a legal protection standpoint (and you should definitely discuss this with a qualified attorney), but in terms of taxes, your Schedule E will look exactly the same as if you did not set up a single-member LLC excepting costs that are specific to setting up and running the LLC itself as Tom mentioned above.

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  • Lesley Resnick
    Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes
    10y

    LLC is a legal entity, not a tax entity. The single person LLC and Sole proprietor (owning the property in your name) will be treated the same for tax purposes. The more important part is your profession. If you are not a "real estate professional", you can only take up 25k of deductions against your regular income subject to income limits. The real estate expenses (depreciation, travel, maintenance, etc.)can be taken against the income of the business to lower your taxable business income.

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