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LLC tax benefit (owner occupied multifamily house)
I own a 2 family house in NJ. Currently if I make any repair in the house I can only deduct half of it on my tax return since its 50% owner occupied and 50% rented.
If I open an LLC will I be able to deduct 100%? is it worth it?
Will I be able to do that with my current FHA mortgage?
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- Mercer Island, WA
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#3 Real Estate Deal Analysis & Advice Contributor
- Rental Property Investor
- Mercer Island, WA
A LLC is a pass through entity for tax purposes unless you elect special tax treatment. So it would have no effect. You can only repairs on the rented unit. not on your residence. That doesn't necessairly mean you can deduct 50% of all repairs. A faucet replacement in the rental would be 100% deductible while the same repair in your unit wouldn't be deductible at all. A new roof, OTOH, wouldn't be "deductible" at all. Rather it would add to your basis and increase your depreciation. Which is limited because you occupy one unit.