Tax Question for Rentals

13 Replies

Applied and was approved for a guidance line of credit in my personal name before starting a real estate business with another party. Closing on the home next week but payments will be made to lender from company account. Since the loan is in my name do I file taxes for the rental property on my personal tax form or the business??

@Cheree Harris

How are you and the other "party" going to be involved in real estate?
Is there an agreement to split the profits by a certain percentage?
Is that party lending you money or are you lending that party money?

Is there a purpose for making loan payments using the entity? Do you get a legal protection by doing this? do you get a tax break by doing this? etc
Actions should have a purpose.

@Basit Siddiqi

I'm not sure if these are rhetorical questions that I'm supposed to be thinking about or if you are asking these questions for more info but all I need to know is when I file taxes am I listing this property and it's rents and expenses on my personal taxes or file under the business taxes (the LLC).

Originally posted by @Cheree Harris :

@Basit Siddiqi

I'm not sure if these are rhetorical questions that I'm supposed to be thinking about or if you are asking these questions for more info but all I need to know is when I file taxes am I listing this property and it's rents and expenses on my personal taxes or file under the business taxes (the LLC).

a tax return or tax returns is an after the fact thing. 
I wouldn't try to get your tax return a specific way and then try to match your finances to reflect that.

You should instead figure out why you are doing what you are doing and then have the tax return reflect that.

 

@Cheree Harris

I’m sure if you realize, but you haven’t given us enough info.  That’s why Wayne and Basit are asking questions.  How you’ve setup your business and how you operate/fund it are crucial to answering your question (and to maintaining your corporate veil)

@Cheree Harris It sounds like you setup an LLC with a partner. You would file a partnership tax return for the LLC. If the rental income and expenses run through the LLC, then you would typically include it on the LLC tax return. How the LLC members split the net income depends upon the operating agreement between the partners. I recommend that you find a tax advisor that understands real estate to discuss this in more detail to make sure you have the business setup properly.

@Cheree Harris there is a lot of missing information to this situation but ultimately, it will hit a schedule C on your 1040. If you set up and LLC with a partner, you will file a 1065 and receive a K-1. That K-1 reports to your Schedule C.

@Bob Norton

Hi I have and we have an operating agreement. I don’t know whether I’m not asking the question the right way but all I’m trying to figure out is since we used my personal information to obtain the line of credit and purchased a home as part of the business and not for me personally, do we file this property under the business taxes or my personal income tax. I don’t know what more information anyone else on this thread needs in order to answer that.

@Cheree Harris

So, it looks like its a personal asset. Talk to some qualified professional to make sure you transfer the property tint your LLC correctly to capitalize it. Some cpa/accountants will have to weigh in on how the expenses are split. Some will probably go on your personal return, and the rest will go with your LLC (which will pass onto your personal return anyway).

I know other responses keep mentioning SchC, but it really depends on what you are doing with the asset.  If you are holding it as a rental and you've have it "ready for rent," then you really should be using SchE, or whatever is the equivalent for doing the partnership return (which I thought would pass onto your personal SchE also).  Consult with some professionals.

Good luck.