California resident with Wyoming LLC...
We are in California, but doing business as a Wyoming LLC, how does this work at Tax time?(Tax deed investing...first year, all losses, but this year some deals in progress)
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Of course, talk with your CPA to ensure you receive personalized advice for your situation. But, generally, California residents are subject to tax from all sources no matter the state where the income was earned. This means the income form your WY LLC is taxable on your California return. Since you are managing the WY LLC from California, it will be deemed to be "doing business" in California and is subject to the $800 LLC minimum tax and should register as a foreign LLC in California. Depending on where the property is located that you are earning income, you may have to file a nonresident income tax return for the money earned in that state. If the property is in Wyoming, likely there is no tax return because Wyoming has no state income tax. But, if you are doing business as a Wyoming LLC but the property is located in a different state, you may have to file a nonresident income tax return in that state for the rental income earned in that state. California will tax that rental income as well but give you a credit for taxes paid to the other state. Usually this means you will still end up paying tax on that income in California because it has a higher tax rate (meaning it gets taxed twice to some degree). For instance, say you earned $50,000 in rents which equated to $2,000 of tax in another state. California will tax that $50,000 as well, probably at a higher tax rate, say, $5,000 in taxes. You would get a credit for $2,000 in California, reducing California taxes to $3,000 on that income instead of $5,000 but you still paid tax on it in the other state and in California for a total tax of $5,000 though only $3,000 went to California.
Also, real estate investors may potentially qualify for up to a 20% deduction for their rental income through the 199A pass-through deduction. However, to earn the deduction, investors must take certain steps and keep certain books and records. ..
Of course, consulting with a professional for your personal situation is always advised. The forums are great for idea generating but never should be substitutes for personalized advice.
*this post does not create an attorney-client or CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.