Will transferring primary residence to LLC affect taxes??

Question

I'm new to real estate investing and new to the United States and how taxes are filed here.

My dad, a US citizen who lived all his life abroad, sent some cash from my home country to be invested in the US. Spouse and I bought a property in April. We used the cash dad sent and some credit cards with 0% APR promotional period to buy and fix the property. This property is our primary residence, the title is currently in my name and we are house hacking to bring in some income to help pay those credit cards.

My goal is to ensure that dad, spouse and I are all listed as shared home owners on the property according to our respective shares (dad should own the majority share). I set up an LLC and I want to set the share distribution in the article of organization. But I also want to make sure that my dad wouldn't be taxed for any income we are getting from our current roommates, since spouse and I have been using this income to pay off the credit cards we used for the purchase.

My question is, will transferring the property to the LLC affect the taxes we will be paying on it? Is there a title transfer tax? Will it affect taxes for my dad? Do I need to file taxes for my dad at all or will filing LLC taxes be sufficient? My dad never filed taxes here because he never really lived here beyond being a 3 months old baby. We got his SSN last year.

Sorry, if my post seems to be all over the place. I just want to make sure that I'm not missing something I should be doing. We bought the property in Riverdale, GA if it helps. Clayton County.

Thank you so much in advance for your help 🙏

Stan Sugarman · Answer

Yes you should be able to leave it as is. A security deed to the LLC with an option to buy the home at the mortgage amount should protect your family's interest.

Curt Smith · Answer

If multi member you owe partner return every year else penalty. File to shut down with the Secretary of state. And file with IRS shuting down partnership. This is depending on how LLC was set up , was IRS told was a partnership or not etc?? contact your attorney/CPA who set this llc up.

Mayar Ghaly · Answer

@Curt Smith, @Stan Sugarman Thanks for the fast response!
I have set up an LLC but haven't transferred the title yet. Can I just leave everything as is then and do the security deed instead? I don't have any mortgage because I was a cash buyer this way.

Stan Sugarman · Answer

You will lose homestead exemption on the home which is a considerable tax consquence.

Curt Smith · Answer

Too bad you set up that LLC...

Yes there are tax issues, your CPA needs to weigh in. I'll only say "yes" tax issues.

BUT you'll loose home stead exemption at the county level when they see the title xfer into an LLC, this is certain. I screwed up my own residence moving into a trust, which is ok, but I set mailing address to be a PO box... I got that fixed and home stead back but your scenario is "toast". Don't do it.

Protect your other partners with a security deed any real estate attorney/title office can write it up. This is safe and the simplest!! No doubt you have a 1st mortgage by a lender, file the security deed as a 2nd. The house can't be sold without satsifying what ever you put into the security deed. Literally any agreement can be packed into a security deed. Then no tax implications.

Will transferring primary residence to LLC affect taxes??

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