How To Structure My Properties (LLC and write-off question)

Question

I own a few properties (SFR, duplexes) in various states: CA (2 multis), FL (2 multis), TN (1 SFR). All are sole-proprietorship.  Some are paid off, others have mortgages.

1: How would you structure these in LLCs (I know the answer varies, just looking for your personal opinion and why)

2: I travel to different sites looking for new investments. How can I write these off on my taxes? As sole-prop, I can only write off travel as misc expense which tends to be a red flag for IRS.

I manage my properties online myself. I have a lot of write-offs like internet, office, websites, etc. However, splitting these write-offs into individual properties isn't realistic.  Can I create a "management company" LLC that I own, then pay that LLC from each property, then pay myself from that LLC?

3: Main question: considering all the above info (I own properties in multiple states that I manage myself), what's the best structure to write off my expenses in a way that minimizes any IRS red flags?

Thank you!

Christopher Smith · Answer

Splitting expenses is a total no brainer, been doing it for years and years. Any reasonable allocation will do, slam dunk

Ashish Acharya · Answer

What you described are not red flags.

Yes, creating an operating/management entity will make it easier but will not give your significantly greater deductions. You are entitled to same deductions without it.

Natalie Kolodij · Answer

I own a few properties (SFR, duplexes) in various states: CA (2 multis), FL (2 multis), TN (1 SFR). All are sole-proprietorship. Some are paid off, others have mortgages.

1: How would you structure these in LLCs (I know the answer varies, just looking for your personal opinion and why) Attorney Q. NO tax benefits for LLC's on rentals. But if you add 2+ people to it you'll have a separate more involved partnerhsip tax return to file annually.

2: I travel to different sites looking for new investments. How can I write these off on my taxes? As sole-prop, I can only write off travel as misc expense which tends to be a red flag for IRS. The answer here is it depends. If you're not already operating in the location where you're visiting to look at properties those costs can't be written off yet. If you live in Ohio and own 1 rentals there, but visit Florida 3x this year to look at houses- you can't write those travel costs off. Once you BUY something in Florida those costs get added to the basis of that property.

I manage my properties online myself. I have a lot of write-offs like internet, office, websites, etc. However, splitting these write-offs into individual properties isn't realistic. Can I create a "management company" LLC that I own, then pay that LLC from each property, then pay myself from that LLC? You can make the payments from a separate management LLC for purposes of keeping it clean/LLC separation/ but tax wise it's still bestot just split things appropiately. Don't report a separate "management company" for these costs. If you spend $100 on internet and have 2 rentals- put $50 on each schedule E. Not $100 on a third one called "management" or such.

3: Main question: considering all the above info (I own properties in multiple states that I manage myself), what's the best structure to write off my expenses in a way that minimizes any IRS red flags? Nothing above should trigger a red flag in my experience - work with a REI tax expert if you're unsure.

Kenneth Woodall · Answer

Thanks Ashisha!

How To Structure My Properties (LLC and write-off question)

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