Sugar Land, TX · Member since 2014 · 6 posts · 1 vote
12y
Listen to podcast #49 here on BP. Has a lot of good tax tips from a CPA who is also an investor.
Generally speaking an LLC isn't going to provide tax benefits since the income passes through to your personal tax return.
What specifically are you trying to accomplish?
Sugar Land, TX · Member since 2014 · 6 posts · 1 vote
12y
Listen to podcast #49 here on BP. Has a lot of good tax tips from a CPA who is also an investor.
Generally speaking an LLC isn't going to provide tax benefits since the income passes through to your personal tax return.
What specifically are you trying to accomplish?
Housatonic, MA · Member since 2014 · 11 posts · 0 votes
12y
I want maximize the tax value of my properties as early as possible and am exploring how to structure my RE investing venture to do so. Thanks for the info!
Commercial Real Estate Agent · Sudbury, MA · Member since 2014 · 118 posts · 25 votes
12y
Income is offset by all expenses, including interest and property tax, along with depreciation. Gains are delayed until sale of swap via 1031 exchange.
If you want long term tax avoidance, consider a self directed Roth IRA, and it won't be taxed at all.
just to clarify: while self-directed Roth IRA is a great way to invest tax-free, @Morgan Burns would not be able to transfer his existing rental properties into it - that would be prohibited transaction.
Maximum annual contributions for Roth IRA are only $6,500 so it would take a while to have sizable amount in there to invest. Also, if your income limit is over certain threshold - you would not be allowed to contribute into Roth IRA. An alternative to that would be self directed Roth Solo 401k, which has much larger contribution limit up to $23,000 per year for each spouse and no restriction on the income for contributions.
Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
12y
I agree with @Dusty Corning that LLC would not provide additional tax benefits. @Morgan Burns the main reason for moving your duplexes into an LLC is asset protection, not minimizing taxes.
Do you work with knowledgeable accountant on your tax strategy? Good CPA will not simply do your taxes at the end of the year, but will work with you during the year to help you plan for the tax season and come up with the best strategy to minimize your taxes when that time comes. Also make sure that CPA that you work with also owns investment properties. If he doesn't - that means that he doesn't fully understand the benefits for owning investment property (otherwise he would own some RE).
@Steven Hamilton II is very active here on BP and might be able to help you.
just to clarify: while self-directed Roth IRA is a great way to invest tax-free, @Morgan Burns would not be able to transfer his existing rental properties into it - that would be prohibited transaction.
right, I understand that. I was just suggesting the alternative that actually offers a different tax situation. An LLC or corporation isn't going to save him on his taxes. The IRA is a suggestion for his next deal, and of course, he needs a decent balance to begin with.
Housatonic, MA · Member since 2014 · 11 posts · 0 votes
12y
Wow, very helpful info! My new CPA is a real estate investor, I made sure of it. Brand new relationship is all. So LLC sounds like the right move for asset protection, but is it the best option for asset protection?