How to claim depreciation after Quitclaim a property to an LLC?

2 Replies

Hello

I have been listening to a lot of podcasts that talks about doing a Quitclaim Deed to transfer a property from personal name to an LLC for asset protection purposes. I am interested in doing it, however, I am concerned about depreciation.

My CPA said that I can depreciate a rental property in 27.5 years. This depreciation helps me lowering my taxable income from W2. A lot of savvy investors seems to be able to write off all of the property depreciation against their taxable income. So at the end of the day, they would pay $0 for income tax. However, one question that has been going through my mind which I couldn't find an answer for is this: if I deed the property to an LLC, would the property then be on the LLC tax return? If so, how can I still depreciate the value of the property after I Quitclaim the property to an LLC? The purpose is to use depreciation to lower my taxable income.

Sorry for the noob question, thank you all in advance. 

Yibing

  

@YiBing T. , if it's your wholly-owned LLC, and you haven't elected for it to be taxed as a corporation, you keep on reporting the property on your own tax return, exactly as before you quitclaimed it to your LLC. You keep on reporting your depreciation (and other expenses) just the same as if it wasn't in an LLC. This is because wholly-owned LLCs, unless they elect otherwise, are disregarded for federal income tax purposes.

If you're talking about a multi-member LLC, that's a different, more complicated story.

@YiBing T.

If the LLC is a single-member LLC - the property would continue to be reported on your individual tax return. There would be no change to accumulated depreciation. You may want to speak with your accountant if you can increase the basis of the property for the title costs that you pay to the title company for the transfer.

If it is a multi-member LLC - you are transferring property into a partnership and the partnership would receive a transfer in basis of the property.
It gets a little bit trickier here because the other partners may be assuming a portion of the mortgage when transferred.

Basit Siddiqi, CPA
917-280-8544

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