Cash Purchase of duplex and associated tax deductions

8 Replies

I've just begun looking into RE investing after having a BP account for a few inactive years. 

Recently I was talking with an agent who proposed the idea of me forming a single-person LLC and then using it to buy an investment property for cash. He said that the entire purchase price could be deducted from income, thus offsetting capital gains from other (ie, stocks) sources. This seems very incorrect to me as the property would be a capital asset with depreciation deductions taken over years, yet the agent insists that he is correct and that this is a common practice for RE pros.

I trust the agent but just think he is ill-informed and/or missing further details regarding his proposal, though I am open to the possibility that I may be missing something as well.

Can anyone shed any light to help bridge the gap here  ?  Thanks.

You're right, your agent is clueless about this. An LLC for holding rentals has No tax benefits whatsoever. Either way, the purchase price gets depreciated, as you knew.

I needed this laugh today. 

Tell your agent if he is going to be doing taxes like that he can make a lot of money until he goes to prison. 

No - business assets are depreciation regardless of how purchased. You expense the building value across 27.5 years

@Jeff Cantrell   Yes, exactly.  At least it helps offset the income.

For me, I have NOI of about $10k on a property and the depreciation happens to be about $10k. So tax wise I'm paying about nothing on it for now.

@Ryan Wesley

*Cringe* a real estate agent providing legal(getting an LLC) and tax advice(capital gains tax).

Did you share with the agent your tax information? I.E. how much you make, how much the rental would make, etc.

I would reach out to your accountant to verify what he mentions. If you don't have an accountant, you may want to hire one or atleast get one to give you a consultation.