Using LLC when filing Married Separately

4 Replies

Hi everyone, 

I own two rentals in my personal name.  My wife and I file married separately due to her student loans.  Her loans are repaid based off her income and her loans are forgiven in 10 years due to the non-profit loan forgiveness program (We are in year 7 so I have to deal with this for 3 more years).  If we combine my income with her income then she would not qualify for this program and her loans would not be forgiven.  

My problem is my real estate deductions/losses do not come off my personal income because I file married separately.  So I'm not getting the tax benefits of my investments.  

The thought came to me today . . . if I form an LLC, will I be able to deduct my losses on my rentals if I file married separately?

I know its a specific circumstance but does anyone has experience or advice with this situation.  Thanks!

Jason

@Jay Elvin , Unfortunately I am single and do not have much experience with this type of case directly. However I recommend that you speak with a CPA on this matter as they will be able to guide you through this situation with ease and set you up quickly and properly with the best solution for you. The small cost you have to pay them for their time to set it up is well worth the advice and protection they will give you for years to come. My CPA has worked wonders for my properties saving me thousands and a lot of headaches. It pays to do it right. 

I can tell you though that a LLC should only cost about $300 to setup and $50 a year to maintain, and is well worth it to put your properties under individual LLC's to protect your personal assets. In case, god forbid, anyone every tried to come after you for an incident that occurred at a property.

Originally posted by @Jay Elvin :

Hi everyone, 

I own two rentals in my personal name.  My wife and I file married separately due to her student loans.  Her loans are repaid based off her income and her loans are forgiven in 10 years due to the non-profit loan forgiveness program (We are in year 7 so I have to deal with this for 3 more years).  If we combine my income with her income then she would not qualify for this program and her loans would not be forgiven.  

My problem is my real estate deductions/losses do not come off my personal income because I file married separately.  So I'm not getting the tax benefits of my investments.  

The thought came to me today . . . if I form an LLC, will I be able to deduct my losses on my rentals if I file married separately?

I know its a specific circumstance but does anyone has experience or advice with this situation.  Thanks!

Jason

Having an LLC will not change how the rentals are taxed or if the losses are deductible.

Are you positive she qualifies for the program. Make sure you get documentation. I've recently read about a lot of people being determined ineligible. 

@Joseph DiNardi-Mack @Steven Hamilton II

Thanks everyone!  I did talk to an accountant and you are right Steven.  

As far as student loan forgiveness, we are as certain as one can be with this program.  We get new paperwork each year saying she is enrolled in the program.  It does not look like its on the table for the government to get rid of the program and if so I read they would keep the program for all current participants.  

Originally posted by @Jay Elvin :

@Joseph DiNardi-Mack @Steven Hamilton II

Thanks everyone!  I did talk to an accountant and you are right Steven.  

As far as student loan forgiveness, we are as certain as one can be with this program.  We get new paperwork each year saying she is enrolled in the program.  It does not look like its on the table for the government to get rid of the program and if so I read they would keep the program for all current participants.  

 Jay,

I know I am about the topic. I have a great deal of experience in these matters. Just make sure her hours are certified as qualifying for the program. 

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