LLC and business expenses

3 Replies

I am sitting here at HR Block and they are saying I can no deduct my LLC business expenses from my 2017 W2 income, is this correct or no?

Essential I have 1 rental that brought in $8750

But between all my expenses I am seeing a total loss of approx. $17,000 between flights, office supplies, ect. 

I would hire a real cpa. Preferably one that specializes in REI.

W-2 income and rental income are two totally different animals. Rental income and expenses go on schedule E. Sounds like there may be some type of communication breakdown between you and the tax preparer.

I think there is some confusion because of how you worded this. I think the issue the HRBlock preparer said was that you can't deduct Schedule E losses against W2 income.  

This may or may not be true depending on whether you are a real estate professional. I will assume you are not. Then if your MAGI (Modified Adjusted Gross Income) is greater than $150,000, then you can't deduct the SchE losses against that income. If your MAGI is less than $100,000, then you can deduct up to $25,000. If your MAGI is greater than $100,000 and less than $150,000, a partial deduction is allowed. (there are other conditions as well, you must actively participate, be at least a 10% owner, etc) 

If your deduction is not allowed, all is not lost. These losses are suspended and can be used in future years. Even if your income never gets low enough or you don't actively participate, at some point the suspended deductions can be applied to the profits when they occur. Even if you never have enough profit to deduct all these losses, they can be deducted when you sell. So, keep track of suspended deductions. 

You need to research this. I am not suggesting everything I wrote is complete. I am just giving an idea what happens. 

   

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