Q - treat my house as an LLC?

Question

Hi there.

Looking for advice. I own a single family home. I have an extra bedroom that I will be renting to my friend.

Legally speaking...can I deed my house to an LLC I create, thereby treating the house as a business and not a personal residence? I would create a lease for my friend. Per the lease he will be the only one living there, however I would still be residing in one of the bedrooms.

My thought behind doing this would be twofold:

1) I can deduct my home improvement expenses (cleaning, painting, remodeling).

2) I can deduct the business loss from my personal income

Can I do this? thanks in advance.

Jeremy Williams · Answer

I believe this wouldn't fly with the IRS unless you're not living there at all.  You can deduct a portion of the expenses with a roommate though.

Christopher Brainard · Answer

@Jake Gannon

You should speak with a tax attorney, but I'm going to say no and no. The LLC is going to be a disregarded entity, so as far as the IRS is concerned, it is still your primary residence. If it went to court, I think you would have a hard time convincing a judge otherwise. Additionally, unless you have no other income, I don't think you would be able to make the case that your room rental is 'active' income.

-Christopher

Jake Gannon · Answer

Steven,

Can you elaborate on why this would be wasting my time?

Thanks.

Steven Hamilton II · Answer

Don't waste your time doing that. Just make sure your insurance covers you.