LLC or to not LLC for tax benefits

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LLC or to not LLC for tax benefits

Ian Salinas
Insurance Agent · Valencia, CA · Member since 2017 · 23 posts · 3 votes

This year is the first year I am filling taxes with my rental property. My tax preparer told me that I cannot really benefit from my rental write offs due to my W2 job. He advised that I should maybe look into putting my property into an LLC or maybe S-Corp. One issue is I have a loan on the property. I spoke to my lender and they advised that I can do a quick claim deed. I've been trying to do some research on what steps I need to take and possible ramifications on putting a property with a loan into an LLC. My questions are.

1. Is it a good idea to put a property with a loan into an LLC and is it even possible?

2. Can I take advantage of tax write offs from my property when my property is an LLC but the loan is still in my personal name?

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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
5y
Originally posted by @Ian Salinas:

This year is the first year I am filling taxes with my rental property. My tax preparer told me that I cannot really benefit from my rental write offs due to my W2 job. He advised that I should maybe look into putting my property into an LLC or maybe S-Corp. One issue is I have a loan on the property. I spoke to my lender and they advised that I can do a quick claim deed. I've been trying to do some research on what steps I need to take and possible ramifications on putting a property with a loan into an LLC. My questions are.

1. Is it a good idea to put a property with a loan into an LLC and is it even possible?

2. Can I take advantage of tax write offs from my property when my property is an LLC but the loan is still in my personal name?

You are getting some bad/costly advice. 

Having the property in a LLC is not going to have any tax impact.

Your losses might be limited because your W-2 income is too high. Not even sure if it’s limited based on the advice you got. 


But if they are, they are just suspended, not lost. But if you have a spouse, she could possibly qualify as RE pro and you might be able to take the loss. With just one asset, might not happen. 

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    5y
    Originally posted by @Ian Salinas:

    This year is the first year I am filling taxes with my rental property. My tax preparer told me that I cannot really benefit from my rental write offs due to my W2 job. He advised that I should maybe look into putting my property into an LLC or maybe S-Corp. One issue is I have a loan on the property. I spoke to my lender and they advised that I can do a quick claim deed. I've been trying to do some research on what steps I need to take and possible ramifications on putting a property with a loan into an LLC. My questions are.

    1. Is it a good idea to put a property with a loan into an LLC and is it even possible?

    2. Can I take advantage of tax write offs from my property when my property is an LLC but the loan is still in my personal name?

    You are getting some bad/costly advice. 

    Having the property in a LLC is not going to have any tax impact.

    Your losses might be limited because your W-2 income is too high. Not even sure if it’s limited based on the advice you got. 


    But if they are, they are just suspended, not lost. But if you have a spouse, she could possibly qualify as RE pro and you might be able to take the loss. With just one asset, might not happen. 

    [email protected]941-914-7779
    INVESTOR FRIENDLY CPA®5241 Reviews
    WebsiteView Page
    TaxMD™ | AI-Powered Tax Planning
    WebsiteView Page
    3Reply
  • Ian Salinas
    OP
    Insurance Agent · Valencia, CA · Member since 2017 · 23 posts · 3 votes
    5y

    @Ashish Acharya

    Thank you!

    He did tell me that it’s not entirely lost. But I thought I’d be able to gain from the depreciation in 2020. Yes I have a spouse and she works also. What do you mean by she can be an RE pro and take a loss?

    I just aquifer my 2nd rental in January. So I’m trying to plan early because I’m hoping to have a minimum of 3 properties by the end the year.

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  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    5y

    The only tax benefit that you receive for a SMLLC taxed as a disregarded entity is that you (generally) get to deduct the annual registration fee that you otherwise wouldn't have paid.

    0Reply
  • Ian Salinas
    OP
    Insurance Agent · Valencia, CA · Member since 2017 · 23 posts · 3 votes
    5y

    @Eamonn McElroy

    Thank you!

    How can I take advantage of tax deductions for my depreciation on my rental properties.

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  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    5y

    That is a very broad question, that should be posed to your tax advisor.

    The first step is making sure that the asset is depreciated correctly.  It's easy to mess this up.

    The next steps involve taking into consideration hurdles under the at-risk, basis and PAL rules.

    Best of luck.

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