Can I use a LLC to remodel my home that I bought and use expense

Question

I am in the process of starting construction management & consulting business.

At the same time, I am buying a personal home that I will rehab and live in.

Can I remodel the home I am buying through my LLC? Legally?

What would that look like?

spend money through a business bank account?

Thanks for help

Basit Siddiqi · Answer

@John McAllisterYou can use the funds from the LLC to rehab your personal residence. The funds would be considered a distribution and not necessarily a write-off.You would have an increase in basis of your personal residence which will be beneficial if you decide to sell the property or decide to convert it to a rental property.

Michael Plaks · Answer

@John McAllister

Not sure what you're trying to accomplish. If you're rehabbing your personal residence, expenses are not tax-deductible, no matter who you pay them to, including to your own company. These costs are added to the cost of buying your home, so they might possibly reduce your future capital gain taxes when you eventually sell it. Often, there's no capital gain tax on the sale of a residence anyway, so you never reap any tax benefit from rebuilding your own house. (Well, you can deduct the sales tax paid on materials, but it's either a minor tax benefit or none at all)

However, if your company is paid for work, that income is taxable for the company. So, your plan may result in creating phantom taxable income where there was none. Does not sound like a great idea to me, unless I'm missing some other purpose of your plan.

John McAllister · Answer

@Ashish Acharya,

I would buy tools through the company, and then have some income on the book for end-of-year taxes.

I plan on starting this business on a small scale, while I keep my day job.

Just wondering if there are any benefits of running rehab through an LLC, but what it seems like from your response there aren't any.

Ashish Acharya · Answer

Yes, if you pay your company arms length cost as any third party would. But there isn't any tax benefit. Are trying to inflate company’s income for lending purpose or to meet other debt covenant requirement by doing so?

Can I use a LLC to remodel my home that I bought and use expense

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