Real LLC Tax example
Hi everyone,
I am trying to understand this whole tax situation with a LLC and how we actually get taxed.
Say I have a property, under my personal name, that generates $1,000 per month on rents and $800 per month on all expenses combined. My annual cash flow would be $2,400 but I wouldn't pay a nickel in taxes due to depreciation and this will show up as a paper loss in my income tax.
Say if I held the exact same property under a LLC. To make the comparison easier, let's assume I have a 50% ownership in a multi-member LLC and the LLC has two of the properties noted above. So I would have $2,400 in actual cash flow (my portion) but the income statement will show a loss.
Question 1: I heard LLC owners pay taxes on their distribution. My portion of the distribution will be $2,400 but LLC had a loss in P&L. Do I pay taxes on this $2,400 or no?, If I do pay taxes, do I pay taxes based on the table below? or based on something else? (this is personal income tax table)
| Taxable Income | Tax Rate |
| $0—$18,550 | 10% |
| $18,551—$75,300 | $1,855 plus 15% of the amount over $18,550 |
| $75,301—$151,900 | $10,367.50 plus 25% of the amount over $75,300 |
| $151,901—$231,450 | $29,517.50 plus 28% of the amount over $151,900 |
| $231,451—$413,350 | $51,791.50 plus 33% of the amount over $231,450 |
| $413,351—$466,950 | $111,818.50 plus 35% of the amount over $413,350 |
| $466,951 or more | $130,578.50 plus 39.6% of the amount over $466,950 |
Look forward to hearing from you and thanks in advance.