Should I put my paid off rental into a s-corp

Question

I have a paid off house, should I put it into a s-corp? It’s currently making $42000/year. It has been fully depreciated. I’m looking for ways to save on taxes.

Linda Weygant · Answer

S-Corps save money on Self Employment taxes for active income.  There is no tax savings on income tax within an S-Corp.

Rentals are already not subject to self employment taxes, so an S-Corp gives you none of the upside and all of the downside.

Charles Carillo · Answer

@Russell T.

Typically CPAs suggest against this. I would speak to your CPA before making any changes.

Here is a short list of why most CPAs suggest against it:

- S-Corporations only have one class of stock and a very limited number and type of shareholders. - Contribution of property, sales or liquidation of shareholder interest in the S-Corp, and distributions of profits from S-Corporations all trigger taxable events. -  Depending on the level of involvement in the entity, certain shareholders may not qualify to deduct S-Corporation losses from other income sources. - S-Corporation assets do not receive a step-up in tax basis upon the death of a shareholder. - If you fail to comply with the requirements of being an S-Corporation, which requires the business to hold both initial and annual director and shareholder meetings, adopt and maintain bylaws, issue stock to all shareholders, and record any stock transfers, you can have your S-Corporation status revoked.

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