I am considering buying a Florida vacation condo rental. As part of the consideration, I am trying to figure out how I can get the largest tax advantage. Is it better for my wife and I to purchase the property and have it under our names or to create a LLC and own it under that? Which has the better tax benefits to us? What are other pros and cons to each option? I am very new to all of this so I need lots of help and BP seemed like the right place to ask!
Thanks in advance for all your help!
The LLC itself has no affect on taxes as they pass through directly to you anyway, unless you choose to have the LLC taxed as a Sub S Corp, which usually only makes sense with larger volumes of income as some could be salary, and some as "profit" which wouldn't be subject to self employment tax (like in the case of flipping which is ordinary income), AND doesn't relate to passive investment income.
An LLC is more for protection as opposed to tax advantages. I would not suggest you purchase in the name of an LLC for tax savings. You need to research buying in both your names in this case if the property is sold you can utilise your capital gains. Another thing you can research is buying with your 401K. My assumption is that if it is a vacation rental it will be classed as commercial purchase. You can still have an LLC that runs your vacation rental thus making further savings.
Originally posted by @Annunciata R. :
Another thing you can research is buying with your 401K.
@Alan Miller are you considering using this vacation rental yourself occasionally? If that is the case, using 401k to buy this would constitute a prohibited transaction. You are not allowed to receive any personal benefits from the investments of your 401k.
You wont be able to use the vacation home for yourself
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!