What tax benefits can I get?

6 Replies

I currently own 3 properties (all in my name) and would like to know the benefits of starting a corporation.
I also want to make sure I'm getting all the tax benefits possible. Any accountant or bookkeeper anyone would recommend?

There are no income tax benefits of having your rentals in an entity versus in your name. Having rentals in an entity provides other tax benefits, such as more opportunity for tax and estate planning. All deductions that can be taken against rental income can be taken regardless of how the asset is titled.

I would also caution against putting your real estate rentals into a C or S Corporation.  Only under very specific circumstances is this considered a good idea, so you'd want to make sure you understand the pitfalls (there are a lot of them) very well before going down that road.

An LLC is generally the preferred entity for holding real estate, but it is a pure liability protection play (talk to a lawyer about how that works). The taxes are exactly the same for an LLC as for owning them yourself, the only difference being that you now get a tax deduction for all the expenses necessary to maintain the LLC.

@Michael Stoltzfus
Google “Schedule E” to see a listing of typical tax deductions for rentals. Better yet, connect with one of the tax pros on BP to see how those deductions can be optimized for your unique circumstances.

You are already getting tax benefits. I would ask you to talk to your CPA about a retirement plan such as a SOLO 401K (there are requirements that must be met). Also, make sure you are taking all deductions legally possible. When you buy a computer for your business, a printer, supplies, use gas driving to a from-all these may be tax deductible. The IRS LOVES real estate investors and gives us a tax break for working our way to wealth:)

Solo 401k can provide benefits, but it's doubful that you can transfer your CURRENT properties into the solo401k.   And the Solo 401k is intended for retirment, so you cannot enjoy anyu of the profits until you reach retirement age.   (You can borrow against the solo 401k, but it's realtively short term).    Another Caution:   Not evey CPA is knowledgeable when it comes to these matters...... so ask for references from other investors, shop around, etc.   

OMG, I should proofread, so many spelling errors in my last comment!   

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