Brunswick, ME · Member since 2018 · 28 posts · 7 votes
Hello BP friends! Can someone clarify for me the pros and cons of purchasing an investment property (which I will live in) with an llc vs a personal home mortgage? Specifically, tax incentives/ deductions?
My research seems to show with a personal mortgage I can deduct my mortgage interest, property taxes, and home equity loans or lines of credit for funds to improve the home? How do these tax benefits compare to starting an llc which would purchase the home? I am assuming the LLC mortgage terms would be different(term, down payment, interest rate)? Can I use an LLC on an FHA?
Thanks all for the help. I am frantically trying to lower my tax bracket, beyond hitting the 401 (k)/ IRA limit real estate seems the best way to do so.
Lots of Disadvantages, No advantages. If you bought in an llc....no fha/conventional loans, no homestead property tax exemption, no section 121 exemption when you sell. Buying with llc...you could claim depreciation, but you’d have pay yourself market rent , which is taxable income greater than your depreciation.
@Logan Jamieson I am not a CPA, but I don't think the LLC will really affect your tax situation if it is your primary residence. In addition, it seems like there could be some very good reasons not to put a primary into an LLC. I would consult with a tax professional in your area on something like this.
Lots of Disadvantages, No advantages. If you bought in an llc....no fha/conventional loans, no homestead property tax exemption, no section 121 exemption when you sell. Buying with llc...you could claim depreciation, but you’d have pay yourself market rent , which is taxable income greater than your depreciation.
The advantage of an LLC is the legal protection, although a strong umbrella policy can give you good protection as well. Don't overthink or over-complicate things here. You'll more-than-likely get better terms and make more money buying residential property in your name as the financing is much friendlier.
Thank you all for the reply and info. Was secretly hoping that under an llc the entire mortgage expense would be a tax deductible business expense. Will definently utilize my tax account services for my next purchase, I just like to go in armed with as much info as possible.