Do I need a partnership LLC to depreciate and write off expenses on a rental property
Investor · Alexandria, VA · Member since 2023 · 92 posts · 52 votes
Do I need a partnership LLC to depreciate and write off expenses on a rental property
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Jason MalabuteBusiness Member
Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 899 votesHi David,
It sounds like there might have been a mix-up in what the accountant was explaining. I think they might have been referring to the Passive Activity Loss (PAL) limitations. With rental real estate, you can usually deduct up to $25,000 in passive losses, like depreciation and expenses, if you actively participate in the rental activity.
But here’s where income comes into play: if your modified adjusted gross income (MAGI) is $100,000 or less, you can take the full $25,000 deduction. Once your income gets between $100,000 and $150,000, that deduction starts to phase out and is completely gone by the time you hit $150,000. So, if your MAGI is over $150,000, you won’t be able to take those passive losses against other income, like your wages.
There isn’t actually an $80,000 threshold in the tax rules as far as I know, so that part might have been a misunderstanding. Hope that helps clear things up! Let me know if you have more questions about it.
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30 Replies
- Rental Property Investor · Bow, NH · Member since 2016 · 216 posts · 185 votes1y
Yes, my cpa told me the same thing about depreciation. At the end of the day (from what I understand) it is a wash anyway. When you sell the property, if you depreciate it, you pay the recapture. Does your tax professional suggest you create this LLC and have a 1% owner? Seems like this may be finding a way to force the depreciation issue....is there value in doing that? It doesn't appear so to the layman. I'm not well versed in the tax code by any means but this whole depreciation thing seems like something that applies to some people based on individual circumstance but the gurus preach it to the masses.
- Investor · Alexandria, VA · Member since 2023 · 92 posts · 52 votes1yYes, she did. Depreciation I am less concerned with as I agree, based on what I understand, it's lowering taxes now, which will have to be paid later when the house is sold. From a time value of money perspective, I can see this as being valuable, but overall it does seem to be closer to a wash.
Quote from @Dan Thomas:
Does your tax professional suggest you create this LLC and have a 1% owner? Seems like this may be finding a way to force the depreciation issue....is there value in doing that? It doesn't appear so to the layman. I'm not well versed in the tax code by any means but this whole depreciation thing seems like something that applies to some people based on individual circumstance but the gurus preach it to the masses.
I am more interested in the LLC, so I can write off expenses. From what I took away from my conversation with her, without the LLC, I can not write-off any expenses related to the house. - Rental Property Investor · Bow, NH · Member since 2016 · 216 posts · 185 votes1y
From what I understand an LLC is a pass through entity and does not provide the same write off benefits a s or c corp does. Again, this is just what I have gathered over the years so you should take your tax professionals advice however I'm pretty certain an LLC does very little in terms of tax benefits. It is mostly for segregation of assets for risk management.
- Rental Property Investor · Bow, NH · Member since 2016 · 216 posts · 185 votes1y
and I'll add. My CPA has never suggested LLC's for my particular situation. It has always been dictated by my bank or in 2 cases by my lawyer when other people were involved. Again, risk management related, not tax benefit related.
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes1y
Quote from @Dan Thomas:
Yes, my cpa told me the same thing about depreciation. At the end of the day (from what I understand) it is a wash anyway. When you sell the property, if you depreciate it, you pay the recapture. Does your tax professional suggest you create this LLC and have a 1% owner? Seems like this may be finding a way to force the depreciation issue....is there value in doing that? It doesn't appear so to the layman. I'm not well versed in the tax code by any means but this whole depreciation thing seems like something that applies to some people based on individual circumstance but the gurus preach it to the masses.
@David Cherkowsky, I'll just comment on the value of depreciation and leave the rest of it to a tax expert.
Yes, depreciation is generally meant to defer taxes but that can have a LOT of value and here is why:
1. Money today is worth MORE than money in the future. By not paying tax today, that money can be used by you productively to earn MORE money. Then if you do sell later and you pay the tax, you are paying it with "future dollars" which are worth LESS because of all the inflation that occurred in the interim.
2. You don't have to recapture the depreciation with a sale!
If you want to sell a property and keep deferring that tax by NOT recapturing the depreciation, you can do a 1031 exchange where the proceeds are held by a licensed intermediary for a short time while you identify and close on a replacement property. Basically you sell one investment and roll the money directly into the next investment.
This allows you to start taking depreciation all over from the beginning again and hopefully on a more expensive property with MORE depreciation.
3. You can ACCELERATE the depreciation!
By default depreciation is straight line taking a flat amount per year based on the expected life of what you are depreciating. For example 27.5 years for a residential property. However, you can choose to do a Cost Segregation Study and instead of depreciating the property as a whole you depreciate each piece of the property some of which have a shorter lifespan and that allows you LARGER deductions sooner!
4. Your heirs don't recapture that depreciation when you die!
When your heirs inherit your properties, they do so at the "stepped up basis" aka the value of the property when you died. So, nobody pays to recapture all that tax you deferred!
So, if you plan it well you can deffer those taxes and then stiff the tax man by dying before you finally cash-out and sell those properties.
- Investor · Alexandria, VA · Member since 2023 · 92 posts · 52 votes1y
Quote from @Kevin Sobilo:
Quote from @Dan Thomas:
Yes, my cpa told me the same thing about depreciation. At the end of the day (from what I understand) it is a wash anyway. When you sell the property, if you depreciate it, you pay the recapture. Does your tax professional suggest you create this LLC and have a 1% owner? Seems like this may be finding a way to force the depreciation issue....is there value in doing that? It doesn't appear so to the layman. I'm not well versed in the tax code by any means but this whole depreciation thing seems like something that applies to some people based on individual circumstance but the gurus preach it to the masses.
@David Cherkowsky, I'll just comment on the value of depreciation and leave the rest of it to a tax expert.
Yes, depreciation is generally meant to defer taxes but that can have a LOT of value and here is why:
1. Money today is worth MORE than money in the future. By not paying tax today, that money can be used by you productively to earn MORE money. Then if you do sell later and you pay the tax, you are paying it with "future dollars" which are worth LESS because of all the inflation that occurred in the interim.
2. You don't have to recapture the depreciation with a sale!
If you want to sell a property and keep deferring that tax by NOT recapturing the depreciation, you can do a 1031 exchange where the proceeds are held by a licensed intermediary for a short time while you identify and close on a replacement property. Basically you sell one investment and roll the money directly into the next investment.
This allows you to start taking depreciation all over from the beginning again and hopefully on a more expensive property with MORE depreciation.
3. You can ACCELERATE the depreciation!
By default depreciation is straight line taking a flat amount per year based on the expected life of what you are depreciating. For example 27.5 years for a residential property. However, you can choose to do a Cost Segregation Study and instead of depreciating the property as a whole you depreciate each piece of the property some of which have a shorter lifespan and that allows you LARGER deductions sooner!
4. Your heirs don't recapture that depreciation when you die!
When your heirs inherit your properties, they do so at the "stepped up basis" aka the value of the property when you died. So, nobody pays to recapture all that tax you deferred!
So, if you plan it well you can deffer those taxes and then stiff the tax man by dying before you finally cash-out and sell those properties.
Thanks Kevin! For these reasons, I am absolutely interested in depreciation.
- Accountant · Bryn Mawr, PA · Member since 2023 · 409 posts · 321 votes1y
Quote from @David Cherkowsky:
I purchased a rental property earlier this year, and it will be my first year not taking the standard deduction. I met with a tax professional I found through BP, and in our planning call, she mentioned that if you are filing single, and make over ~$80k, then you cannot write-off any expenses associated with a rental property, or depreciate the property. The only tax benefits would be taxes and interest.
She said to be able to use depreciation and write-off expenses, I would need to create a partnership LLC and have someone else be at least a 1% owner in the LLC.
I've read a few books on real estate tax planning now, but recognize there is a lot that I don't know. I'm mostly looking for a sanity check that this is required.
Thanks in advance for the responses..
I'm so confused right now please elaborate
- Investor · Alexandria, VA · Member since 2023 · 92 posts · 52 votes1y
Quote from @Jonathan Bock:
Quote from @David Cherkowsky:
I purchased a rental property earlier this year, and it will be my first year not taking the standard deduction. I met with a tax professional I found through BP, and in our planning call, she mentioned that if you are filing single, and make over ~$80k, then you cannot write-off any expenses associated with a rental property, or depreciate the property. The only tax benefits would be taxes and interest.
She said to be able to use depreciation and write-off expenses, I would need to create a partnership LLC and have someone else be at least a 1% owner in the LLC.
I've read a few books on real estate tax planning now, but recognize there is a lot that I don't know. I'm mostly looking for a sanity check that this is required.
Thanks in advance for the responses..
I'm so confused right now please elaborate
Hi Jonathan. This is the information I have. What are you looking for elaboration on?
- Accountant · Bryn Mawr, PA · Member since 2023 · 409 posts · 321 votes1y
How do you hold title currently? I'm trying to understand why this structure is being recommended.
- Investor · Alexandria, VA · Member since 2023 · 92 posts · 52 votes1yTitle is solely under my name. Financing is with a conventional loan also only under my name.
Quote from @Jonathan Bock:
How do you hold title currently? I'm trying to understand why this structure is being recommended.
I was told if I was filing jointly, the limit to where I can write-off expenses and depreciation is somewhere around $170k, but because I am filing as single, I am greatly limited.
She recommended a partnership LLC where I will own the property 100% within the LLC, but I need a partner to own at least 1% of the LLC. - 1yNathaniel QuesenberryBusiness MemberAccountant · Member since 2024 · 15 posts · 9 votes
Not sure why the accountant is recommending that structure. It doesn't automatically allow you to take the expenses and it doesn't change the fact that the rental is still a passive activity.It also sounds like they are screwing up the passive activity loss special allowance as well. It's the same whether you are filing joint or not and it starts at 100,000 and is completely phased out at 150,000.
LLC's don't magically create write offs unfortunately as much as social media would love you to believe. It's primarily a legal protection vehicle and should be advised upon by a lawyer in most circumstances.
Not sure about your specific situation, so the above may or may not apply to you. - 1yJason MalabuteBusiness MemberAccountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 899 votes
Hi David,
It sounds like there might have been a mix-up in what the accountant was explaining. I think they might have been referring to the Passive Activity Loss (PAL) limitations. With rental real estate, you can usually deduct up to $25,000 in passive losses, like depreciation and expenses, if you actively participate in the rental activity.
But here’s where income comes into play: if your modified adjusted gross income (MAGI) is $100,000 or less, you can take the full $25,000 deduction. Once your income gets between $100,000 and $150,000, that deduction starts to phase out and is completely gone by the time you hit $150,000. So, if your MAGI is over $150,000, you won’t be able to take those passive losses against other income, like your wages.
There isn’t actually an $80,000 threshold in the tax rules as far as I know, so that part might have been a misunderstanding. Hope that helps clear things up! Let me know if you have more questions about it.
Malabute & Company CPAs525 Reviews - Investor · TX · Member since 2020 · 56 posts · 54 votes1y
I believe there is a misunderstanding about what your accountant told you. What she(he) meant was that you cannot write off your depreciation expense,as you will not have enough income to offset the loss, especially if you are married filing single. My first bit of advice woud be to not file as MFS, it is the most disadvantaged filing status there is! However, if you must file MFS, you will be able to roll forward your passive losses resulting from depreciation (or expenses) to a future tax year when you do have enough passive income to offset the passive loss. It could be a year where your expenses are very low, or even when you sell and have a gain. However, do not be confused that you can evade depreciation recapture by not depreciating your property. That is absolutely NOT correct. You will have to recapture whatever depreciation would have been allowable over your business use of the property, whether or not you actually took that depreciation loss. Your accountant can explain this further!
- 1yKatie RippBusiness MemberAccountant · Scottsdale, AZ · Member since 2020 · 31 posts · 38 votes
Hi David!
First of all, congrats on the new rental property purchase! Very exciting.The special allowance for active real estate losses is up to $25,000 in otherwise disallowed (passive) losses, and the modified adjusted gross income (MAGI) phase out range is $100,000-$150,000. Meaning that if you make $100,000 or less, then you can deduct up to $25,000 in rental losses. If you make $150K or more, then $0 of your rental losses are deductible.
To clear up one other thing, depreciation is required to be calculated and deducted on a rental property. So it should still be reported on your tax return, but limited by the passive activity loss limitations referred to above.
Any rental property expenses and depreciation might not be deductible in the first year, but they carry forward to future years to offset future passive income (including the eventual sale/gain of that property). So very important to still report them on your tax return!
As for the LLC, what you were told is incorrect. LLC's do not allow you to deduct any expenses or depreciation that you would not otherwise be entitled to. Including setting up an LLC taxed as a partnership. Having a rental property in a partnership would not change the overall deductibility of property expenses or depreciation, they would still be limited to the passive activity loss limitations (with the special allowance $25,000 mentioned above being a potential exception based on your MAGI).
I hope this is helpful! Happy to answer any additional questions.
Momentum Tax55 Reviews - Investor · Alexandria, VA · Member since 2023 · 92 posts · 52 votes1y
Quote from @Katie Ripp:
Hi David!
First of all, congrats on the new rental property purchase! Very exciting.The special allowance for active real estate losses is up to $25,000 in otherwise disallowed (passive) losses, and the modified adjusted gross income (MAGI) phase out range is $100,000-$150,000. Meaning that if you make $100,000 or less, then you can deduct up to $25,000 in rental losses. If you make $150K or more, then $0 of your rental losses are deductible.
To clear up one other thing, depreciation is required to be calculated and deducted on a rental property. So it should still be reported on your tax return, but limited by the passive activity loss limitations referred to above.
Any rental property expenses and depreciation might not be deductible in the first year, but they carry forward to future years to offset future passive income (including the eventual sale/gain of that property). So very important to still report them on your tax return!
As for the LLC, what you were told is incorrect. LLC's do not allow you to deduct any expenses or depreciation that you would not otherwise be entitled to. Including setting up an LLC taxed as a partnership. Having a rental property in a partnership would not change the overall deductibility of property expenses or depreciation, they would still be limited to the passive activity loss limitations (with the special allowance $25,000 mentioned above being a potential exception based on your MAGI).
I hope this is helpful! Happy to answer any additional questions.Thank you very much Katie (and everyone else that responded in this thread). I will be asking for written clarification because it sounds like I was either given wrong advice or (more likely) misunderstood the advice given.
Really appreciate the help.
- Accountant · Pasadena, CA · Member since 2014 · 102 posts · 36 votes1y
Hi David - You can deduct all expenses (including depreciation) related to your rental property. In case your expenses are more than your income, you come under PAL rules. But if you can't claim loss (as you might not qualify) under that, you can carry it forward and deduct it in the future against your rental income.
To deduct expenses, there is no requirement to create LLC and all. You create LLC for asset protection and has nothing to do for writing off expenses.
- 1yBasit SiddiqiBusiness MemberAccountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
A lot of misinformation in this post...
If you have a rental property, you can ALWAYS write off the expenses that you incur.
The expenses will offset your rental income.
If your expenses exceed your income, you are in an overall loss position.
If your Modified adjusted gross income is above $150,000, your rental loss may be considered passive. There are some exceptions to this but this is the general rule.
The $150,000 hurdle shrinks to $75,000 if you are married but filing a separate return.
Creating an LLC does not suddenly bypass this.
In actuality, you created another filing requirement which your CPA will charge you an extra cost for.
Be aware of who you interview as your accountant.
Basit Siddiqi CPA4.979 Reviews - Investor · Alexandria, VA · Member since 2023 · 92 posts · 52 votes1y
I received the following response:
"The more active income you earn, the less you can deduct from your rental property due to the phaseout of the Passive Activity Loss deduction. As your Modified Adjusted Gross Income (MAGI) increases, the amount of rental losses you can offset against your ordinary income phases out. However, a Partnership LLC can allow you to deduct 100% of your rental property losses, regardless of your MAGI. This is because losses in a Partnership LLC are generally considered passive or non-passive depending on your involvement, and the structure of the LLC can provide more flexibility in how losses are handled."
Does this sound right?
- Accountant · Louisville, KY · Member since 2020 · 75 posts · 55 votes1y
That is not correct as to my understanding of the tax law. Passive activity loss rules still apply to activities inside a partnership. A partnership is a pass through entity. So while the partnership may show a loss, the loss would be passed through to your personal return and then be subject to passive activity loss rules.
The partnership only creates more of a headache as there will be additional tax filings and fees for creation and ongoing support.
Activities inside a partnership are not necessarily taxed any differently than if they were reported on your personal return. It is a pass through entity meaning the partnership does not pay tax at the federal level. It is simply an information return filed to the IRS showing income/expense/etc that is then reported on your individual return in the same manor it would be without a partnership.
- Accountant · NV · Member since 2024 · 39 posts · 25 votes1y
Hey Everyone,
I'll chime in with my perspective on the answer provided by the accountant.
I first want to emphasize to real estate investors, the difference between the tax treatment of rental income derived from an active trade or business compared to investments. You typically will determine if your rental activities are considered an active trade or business under I.R.C. § 162. Rental income that is treated as business income, can be converted to non-passive income if one of the 7 material participation test are met and the taxpayer qualifies for Real Estate Professional Status. Under the Passive Activity Loss Limitations, rentals are automatically considered passive income unless the provisions listed above are met.
However, investment income has its limitations on what tax benefits can be applied. For example, Investment income would not qualify for the home office deduction or the section 179 deduction. These deductions are meant for activities considered active trade or businesses. The taxpayer will be able to qualify for the $25,000.00 special allowance deduction without qualifying for real estate professional status, under a certain MAGI, and this would be phased out at 150k Married and 75k Single.
On its own, opening up an LLC or partnership does not in itself prove that you are treating your rental activities as an active trade or business. Along with this activity, an operating agreement should be signed, a board of directors/ advisors should be formed, and board meeting should be held along with minute meeting notes being taken. Opening the LLC or partnership would only make it easier to prove that the activity is being treated as an active trade or business. The reason the 1% ownership is being suggested, is that this would change the tax treatment from being reported on schedule E as a disregarded entity, to being reported on Form 1065 as rental income reported from form 8825, and then this would passthrough to the individual taxpayer on form k-1.
There is a difference between the tax treatment of non-passive income, vs passive income, compared to business income vs investment income. The tax preparer may be confusing the two.
Yes, the partnership income would passthrough as business rental income, but that does not mean that it wouldn't automatically qualify as a passive activity as a rental under the PAL limitations. You would still need to qualify with material participation and Real Estate professional status to convert this income to non-passive. Also there is a difference between active participation and material participation.I hope this helps!
Austin L. Smith, CPA
- 1ySean GrahamBusiness MemberInvestor , CPA · Detroit, MI · Member since 2016 · 582 posts · 248 votes
Quote from @David Cherkowsky:
I received the following response:
"The more active income you earn, the less you can deduct from your rental property due to the phaseout of the Passive Activity Loss deduction. As your Modified Adjusted Gross Income (MAGI) increases, the amount of rental losses you can offset against your ordinary income phases out. However, a Partnership LLC can allow you to deduct 100% of your rental property losses, regardless of your MAGI. This is because losses in a Partnership LLC are generally considered passive or non-passive depending on your involvement, and the structure of the LLC can provide more flexibility in how losses are handled."
Does this sound right?
No, that doesn’t sounds right. The entity structure is irrelevant in regards to whether you can use the passive losses to offset active income.
Passive losses offset passive income. Active losses offset active income. There are a couple exceptions (i.e. STR, REPS, etc.), but the entity structure doesn't make your losses become active.
I’d recommend getting a second opinion.
@Michael Plaks any thoughts?
Maven Cost Segregation Tax Advisors555 Reviews - 1yMichael PlaksPro MemberTax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votesSo, Sean forced me to chime in. :) Thanks for tagging, Sean.
Quote from @Sean Graham:
Quote from @David Cherkowsky:
I’d recommend getting a second opinion.
@Michael Plaks any thoughts?
David, you received mostly good advice from my colleagues on this thread and mostly bad advice from your CPA, it seems. But it's a lot to sort out and reconcile. I will share just some very brief pointers, because explaining them in detail is not feasible on the forum.
1. Depreciation is helpful, and it is also mandatory. I wrote a long post about the basics of depreciation if you want to understand it better:
https://www.biggerpockets.com/forums/51/topics/1121063-expla...
2. Depreciation typically results in a tax loss. However, you may have to put these losses on layway due to the Passive Activity Loss (PAL) rules which are also addressed in my post.
3. PAL rules have a curve that drops to zero at $150k of combined income for couples. After that, all rental losses are blocked and pushed into future years. However, if you're married and have lived with your spouse at any time during the year, even for a day, then filing separately blocks all rental losses, regardless of your income level.
Filing separately in most cases hurts married couples, tax-wise. You are usually better off filing jointly. (Note: you said "single" which you are not. The correct tax term is "Married filing separately (MFS)")
4. Creating a partnership LLC changes absolutely nothing in regards to PAL rules. You cannot suppress these rules by such trickery. Unless you cheat by reporting things incorrectly, which is easier to hide inside a partnership LLC. But notice my words cheat and hide.
5. Standard deduction has nothing to do with purchasing a rental property. These are two completely separate parts of your tax return. - 1ySean GrahamBusiness MemberInvestor , CPA · Detroit, MI · Member since 2016 · 582 posts · 248 votes
Quote from @Michael Plaks:
So, Sean forced me to chime in. :) Thanks for tagging, Sean.Quote from @Sean Graham:
Quote from @David Cherkowsky:
I’d recommend getting a second opinion.
@Michael Plaks any thoughts?
David, you received mostly good advice from my colleagues on this thread and mostly bad advice from your CPA, it seems. But it's a lot to sort out and reconcile. I will share just some very brief pointers, because explaining them in detail is not feasible on the forum.
1. Depreciation is helpful, and it is also mandatory. I wrote a long post about the basics of depreciation if you want to understand it better:
https://www.biggerpockets.com/forums/51/topics/1121063-expla...
2. Depreciation typically results in a tax loss. However, you may have to put these losses on layway due to the Passive Activity Loss (PAL) rules which are also addressed in my post.
3. PAL rules have a curve that drops to zero at $150k of combined income for couples. After that, all rental losses are blocked and pushed into future years. However, if you're married and have lived with your spouse at any time during the year, even for a day, then filing separately blocks all rental losses, regardless of your income level.
Filing separately in most cases hurts married couples, tax-wise. You are usually better off filing jointly. (Note: you said "single" which you are not. The correct tax term is "Married filing separately (MFS)")
4. Creating a partnership LLC changes absolutely nothing in regards to PAL rules. You cannot suppress these rules by such trickery. Unless you cheat by reporting things incorrectly, which is easier to hide inside a partnership LLC. But notice my words cheat and hide.
5. Standard deduction has nothing to do with purchasing a rental property. These are two completely separate parts of your tax return.Well said on #4 @Michael Plaks
Maven Cost Segregation Tax Advisors555 Reviews - Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes1y
Quote from @David Cherkowsky:
I received the following response:
"The more active income you earn, the less you can deduct from your rental property due to the phaseout of the Passive Activity Loss deduction. As your Modified Adjusted Gross Income (MAGI) increases, the amount of rental losses you can offset against your ordinary income phases out. However, a Partnership LLC can allow you to deduct 100% of your rental property losses, regardless of your MAGI. This is because losses in a Partnership LLC are generally considered passive or non-passive depending on your involvement, and the structure of the LLC can provide more flexibility in how losses are handled."
Does this sound right?
This is definitely not correct.
The entity doesn't change the nature of the income to you.
You said you found this tax professional on BP-was this through the "Tax Pro Finder" or was this someone you just reached out to? Please shoot me a DM -Moderator request - 1yAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
@David Cherkowsky No, you do not need a partnership LLC to depreciate and write off expenses on a rental property. Having rental property is not what determines if you are going to take standard deduction or itemized deduction. Here’s a breakdown to clarify:
1. Depreciation and Expense Deductions: As an individual taxpayer, you can still claim depreciation and ordinary expenses (e.g., repairs, maintenance, insurance) associated with a rental property. These deductions are not limited to partnerships; they apply to all rental property owners, even if the property is owned individually.
2. Passive Loss Limitation: If your adjusted gross income (AGI) is over $150,000 (not 80k), the IRS limits Passive Activity Losses (PALs), which means rental losses, including depreciation, generally cannot offset other income like W2 wages. However, these losses aren’t lost; they are carried forward to offset future rental income or gain upon sale of the property.
3. Creating an LLC: Forming an LLC may offer liability protection and help with structuring multiple properties, but it doesn't change your ability to take rental property deductions or depreciation. A partnership LLC structure is not required to access these benefits.
In short, you don't need a partnership LLC to claim depreciation or deduct rental expenses. These benefits are available to all rental property owners, although high-income taxpayers may need to carry forward losses due to passive activity limits.
This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.
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