Tax question on improving an accessory dwelling unit for AirBnB
Hiya!
I'm a buy & hold investor in Annapolis, MD.
Just gave up W-2 income this year to become a 1099, and I'm trying to apply leverage on real estate I already own: my primary residence. (It will take another year or so before I can show a solid rental history on my first rental purchased last year; until then I won't qualify for another mortgage).
I started construction on an accessory dwelling unit in my back yard, a carriage house (aka a large shed) that will become a not-so-tiny house. I pulled permits, hired a general contractor, will get rental license and pay all applicable occupancy taxes, etc.
The project is well underway and should be completed at the end of this month. Because of the required underpinning of the structure and the high-end positioning of this rehab (full bath, full kitchen), I'm looking at approximately $70K.
I've set up an LLC #1 for my first rental last year (managed on my own), and another LLC #2 this year for my real estate business since I became an agent.
My questions are:
- would it be OK to place my AirBnB business in progress under LLC #1?
- are the improvement costs on the AirBnB dwelling ($70K) a deductible expense, and can they all be deducted in year 1, i.e. 2018?
- does LLC #1 needs to be taxed as an S-corp for me to enjoy 100% of the passive income deduction against my income (AGI over $150K in 2018 due to a job termination severance + consulting + solid agent commission). I will only enjoy this high income level this year, and haven't withheld all taxes yet. Hence trying to reap the benefits of ongoing business investments THIS year... Next year will be a completely different story.
Thanks in advance for all your help. Looking for some clarity before I talk to a professional.
I won't be using the same CPA I hired for the first time last year, as he missed a few things that are going to cost me dearly. And didn't care for his "bedside manners". If you think you know who is the best resource to assist me, happy to hear your recommendations.
Cheers!