First Airbnb, need CPA and legal advice

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First Airbnb, need CPA and legal advice

Viviana Villegas
New to Real Estate · TX · Member since 2021 · 10 posts · 1 vote

I'm in Dallas, Texas and just started renting my first Airbnb rental, I need CPA or legal advice on whether we need to form a LLC now or wait until we have more properties. Will it benefit for us to have income coming in under the business at this point? Am I able to file a schedule E next year if I am receiving income as an individual?

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Luke CarlPro Member
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
5y

@Viviana Villegas

Not legal advice. Not a lawyer. No you don't need LLC and yes schedule E. Not a CPA

This comes up very often here. Use the search function. Tons of threads

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  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    5y

    @Viviana Villegas

    Not legal advice. Not a lawyer. No you don't need LLC and yes schedule E. Not a CPA

    This comes up very often here. Use the search function. Tons of threads

    Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
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  • Dave StokleyBusiness Member
    Property Manager · Cleveland, OH · Member since 2015 · 705 posts · 799 votes
    5y

    If you actually want legal and accounting advice you should talk to a local CPA and attorney. I'm sure people on here will be willing to share their experiences, as am I, but you shouldn't consider it professional advice. It is always worth paying for good professional advice!

    My personal opinion is that you don't NEED an LLC for one property, especially if you're carrying sufficient insurance to protect yourself and the property.

    Here's a good article that discusses the tax benefits are various types of corporations. In short, your LLC income will likely just be taxed as personal income. https://smartasset.com/taxes/w...

    My understanding is that a Schedule E is for reporting income for partners in a partnership or S Corp, so no, you couldn't use it to report individual income.

    Disclaimer! This isn't legal/accounting/financial advice! :)

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  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    5y

    @Dave Stokley schedule E is rental income

    Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    5y

    Just have correct insurance. If you want another layer of protection then get an umbrella policy.

    If you have a mortgage on the property that is already another layer of protection. 

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  • Jerel Ehlert
    Attorney · Austin, TX · Member since 2014 · 890 posts · 759 votes
    5y

    Get two lawyers talking about entity formation and you will get 7 different opinions. :)

    Classic lawyer answer: it depends.

    Non-humorous answer: it really does depend.

    Real-life answer: no, it really does depend.

    On what?  Well, just one for just you/spouse and no other assets...maybe not.  You and anyone else, likely.  Other valuable (non-homestead) assets, much more likely.

    Insurance covers a multitude of sins.  Good business practices do too.

    Talk to a lawyer.

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y

    @Viviana Villegas yes you file a schedule E. Being a sole proprietor (individual ownership) versus LLC makes no difference for taxes. As @John Underwood suggested you want to have correct insurance. Tell your agent it is a short term rental. Many standard home owner and landlord policies do not cover short term rental. From a claims standpoint, short term rentals statistically have a higher claims and pay out rate, so the insurance is more expensive. LLC is fine and can add extra protection if implemented correctly. Just be aware if you have a personal loan on the property and self manage, it can be hard to separate yourself from the property for liability. If you truly want CPA and legal advice, that means paying a licensed professional. I would definitely find a CPA or tax strategist to help you navigate what you can legitimately claim and how to track expenses. At least the first year, work with a CPA to setup property basis, deprecation schedules and advise you on what expenses you can claim. 

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  • David Disraeli
    Financial Advisor · Cedar Park, TX · Member since 2017 · 88 posts · 29 votes
    5y
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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    5y
    Originally posted by @Bill Hampton:

    Viviana,

    I recommend finding an accountant that specializes in real estate taxation over one that is local. You may want to consider working with your accountant remotely to expand your options.

    I would also recommend looking for a tax strategist who is willing to work with you throughout the year, not just when preparing your tax return. You want an accountant that can help you strategize and who is responsive when you want to know the tax consequences of the decisions you are making throughout the year.

    Good luck and let me know if I can be of assistance.

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