Personal Loan to Fund an LLC for REI

5 Replies

I have taken a cash-out loan on my personal residence to fund an LLC in which I am buying real estate.
From an accounting standpoint, what's the best way to structure this? Can I consider this cash infusion into the LLC a loan from me, thus making the repayment of the loan a "business expense", thus a taxable write-off?

Any advice or ideas would be appreciated.

Thanks!
AJ

Great question. Looking forward to the responses!

Repayment of a loan is never a business expense. The interest payments may be, but not the full loan payment. Perhaps that's what you meant.

LLCs are disregarded for tax purposes, unless you're elected non standard tax treatment. So that's not a factor in the discussion.

So the question is "is interest paid for a HELOC on property A deductible if the loan proceeds are used to buy property B?" I believe the answer is yes, but lets ask an expert like @Steven Hamilton II .

Jon Holdman, Flying Phoenix LLC

Great question. This question is actually one that I have on the list to ask my accountant.

Originally posted by @Jon Holdman :
Repayment of a loan is never a business expense. The interest payments may be, but not the full loan payment. Perhaps that's what you meant.
LLCs are disregarded for tax purposes, unless you're elected non standard tax treatment. So that's not a factor in the discussion.

So the question is "is interest paid for a HELOC on property A deductible if the loan proceeds are used to buy property B?" I believe the answer is yes, but lets ask an expert like @Steven Hamilton II.

@Sandy Uhlmann ,

Yes it is deductible, it can be deducted as investment interest or allocated to a specific property if the interest tracing rules are applied. Essentially that means you keep detailed track of where the expenses are allocated.

Medium hta logoSteven Hamilton II EA, Hamilton Tax and Accounting | [email protected] | (224) 381‑2660 | http://www.HamiltonTax.Net