Primary residence and renting - 20% pass through deduction?

3 Replies

I just bought my first house and was wondering if it would be beneficial to make it an LLC for the 20% pass through deduction. My girlfriend is paying half the mortgage which would come out to a bit over 5k per year. Should I make her a formal renter and setup an LLC for the deduction? However you cannot take the new standard deduction of ~12k on top of the 20% pass through deduction correct? If that’s the case then it would not be beneficial to do the above yet
Originally posted by @Michael O'Brien :
I just bought my first house and was wondering if it would be beneficial to make it an LLC for the 20% pass through deduction. My girlfriend is paying half the mortgage which would come out to a bit over 5k per year.

Should I make her a formal renter and setup an LLC for the deduction?

However you cannot take the new standard deduction of ~12k on top of the 20% pass through deduction correct? If that’s the case then it would not be beneficial to do the above yet

The 20% deduction is for businesses, including renting for income. You cannot (legally) create it on your personal residence, even with your girlfriend involved.

Thanks . That clarifies it! Was thinking out loud about house hacking in a sense.

@Michael O'Brien You can't take the standard deduction and itemize deductions too. It's one or the other. From my understanding, this would apply if you were an S-Corp and does not apply for an LLC landlord. No changes for buy and hold investors on that. And lastly, any trickery like pretending to rent out your residence to your girlfriend would probably be considered tax fraud if you have the intent to avoid paying taxes. Just saying.

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