2nd home owned by LLC

[Rachel Cox]

WE have a client that is putting their 2nd home in an LLC, they do not reside in the state of the 2nd home, so this is for liability protection of their investment. Eventually they will retire to this home, my questions are:

*Can they depreciate this home and if so or if not why?

*what is tax benefit or negative of the home owned by the LLC

*should they leave the home in the LLC when they make it their main home for retirement?

Thank you,

Rachel

[Michael Plaks]

@Rachel Cox

You did not mention the most important factor: how are they planning to use this 2nd home?

If it's going to be rented out - then it is a rental property, and they have to report income, subtract expenses and subtract depreciation.

If they are going to use it just by themselves and keep it vacant the rest of the year - then there is no depreciation. The only expenses they could deduct are property taxes and mortgage interest. However, under the new tax reform rules, they are less likely to save money with these deductions. Their deductions could be limited and/or create no difference on their tax bill.

The LLC changes absolutely nothing for taxes. Its only purpose is legal protection. Whether or not this protection is valid and whether or not they need to keep it after they move into this property - those are questions for an attorney familiar with their state law. LLCs and their protection features are governed by the state law.