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LLC formation after property ownership
Hello!
My husband and I are in the process of launching our first STR in Savannah, GA. I have a couple initial LLC and tax related questions.
1) The house was our primary residence, and was bought under my husband's name. It is currently our only purchased residence (we are long term renting our house right now). Is it worth starting an LLC and attempting to transfer this property into the LLC? From what I understand, that process may necessitate paying off the full mortgage (depending on the loan clauses), and/or a loan refinance/restructure.
2) If an LLC is not the best option, should we file for a DBA and acquire and EIN to open a business bank account and keep business finances separate?
Thank you for any help, or any resources you can point me towards!
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My first piece of advice would be to get a CPA and go over the details of your situation. By converting a primary residence to a rental, you are potentially losing out on the capital gains deduction. This means what you are doing could cost you tens of thousands of dollars in higher taxes because you "saved" a few hundred bucks by not seeking proper advice.
Regarding your questions, having or not having an LLC realistically has no impact on your taxable income. The decision to use an LLC is more an asset protection discussion, and there are both positives and negatives to using an LLC in this situation. Whether or not you use an LLC, it is smart to keep your business financials separated and cleanly documented for tax filings.