Can I deed properties in my name, claim income to LLC, and write off LLC business expenses?

[tagteam]

---

@Clarkjd  wrote:

....since the properties are in my personal name, and if I had the LLC set up as a "Property Management" with an operating agreement between myself and the LLC. Could the write offs from expenses of the rental property that are expensed by the LLC pass through to my personal return.......

---

If the properties are in your name and you have a single-member LLC (for "property management"), nothing "passes through" from the LLC to you, regardless of the operating agreement; the LLC is treated as a disregarded entity by the IRS and it is the same as if you had a sole proprietorship. You report all items of income and expense on your individual income tax return (Form 1040).

[Clarkjd]

That makes sense, so if I did have rental income and expenses set up through the LLC bank account would that be suffice for showing income for the LLC and making future purchases through it? Thanks again.

[tagteam]

@Clarkjd  

Yes, but note that the LLC is still disregarded for federal income tax purposes. You would enter all items of income and expense on Schedule E of your 1040.

[Clarkjd]

Ok cool, I think thats more what I am after is the LLC income for future purchases ATM.

Last question, if its a multi member LLC and the property is in my partners name, but we share income 50/50 it seems the consensus is that it wouldn't make sense to utilize the same method of running "property management" income/expense through an LLC because of no way of writing off depreciation/interest? Is it not is it smarter for him to claim all income and split taxes up on back end? or what are your recommendations?

[Carl]

Nothing changes. My earlier comment still stands. All rental income/expenses are reported on SCH E, and nothing what-so'-ever concerning the rental is reported on SCH C. Since an LLC is a disregarded entity by the IRS, there's nothing to "pass through" the LLC or anything else.

[Clarkjd]

even on a multi member LLC? 

If its still a Schedule E, but the LLC Bank account is showing money in and out does that suffice for real estate purchases?

[tagteam]

---

@Clarkjd  wrote:

even on a multi member LLC? 

---

No. Multi-member LLCs (which default to partnerships for federal income tax purposes) report rental real estate income and expenses on Form 8825 and issue K-1s to pass through income or loss.

It is still unclear with respect to what you are trying to accomplish. Can you explain?

[Clarkjd]

Scenario 1: I just want to be able to purchase property through an LLC. So i'd like to "manage" current rentals through LLC and show money in and out of the bank account created for the LLC.

Scenario 2: Multi Member LLC with a partner on a real estate deal. I manage the property he's a cash investor we split cashflow but I am not on the deed currently. What's the best way to handle this from a tax perspective?

[Carl]

because of no way of writing off depreciation/interest?

Why do you keep saying that?  You report the rental income/expenses on SCH E. If you use the program the way it's designed and intended to be used, you will be asked for mortgage interest, property insurance, and the program (not you) will automatically figure the depreciation *for you*.

If its still a Schedule E, but the LLC Bank account is showing money in and out does that suffice for real estate purchases?

Again, the LLC is a disregarded entity. The IS does not, and never has recognized a single member LLC as a separately taxable entity. When you started the LLC you probably obtained an EIN for the LLC. That EIN was obtained directly from the IRS. When you applied for that EIN you were required to provide the IRS a Social Security Number. Any and all transactions associated with the EIN are associated with the SSN it's tied to.

There are only two entities that have any need to know what SSN that EIN is tied to.

1) The person or entity that applied for the EIN

2) The IRS.

That's it. Nobody else has any need to know. Not even the bank where you may have been required to provide an EIN to open a business account.

what are your recommendations?

Stop trying to go around your elbow to get to your thumb. You keep running into your kneecap. If you and the other owner are not married to each other and filing as single, simply split "EVERYTHING" straight down the middle and each of you report your share of income/expenses and everything else on your own tax return on SCH E.

[Clarkjd]

Thank you for your help. I guess its still unclear if running income/expenses through the LLC will allow me to purchase in the LLC? I understand its taxed the same.

We can split everything but if I am not on the mortgage I will show income with no expenses outside of repairs and miss out on depreciation, interest and the mortgage at whole creating much more taxable income. Does it make more sense for him to claim everything?

[Carl]

Scenario 2: Multi Member LLC

If you have a multi-member LLC (assuming it's actually registered as such with your state) then you are required to file a 1065 Multi-Member LLC/Partnership return. The 1065 is due by March 15th. One day late, and the late fee is $205 per month, per member. So file it March 16th and it'll cost $410 in late fees.

With a multi-member LLC, once you complete the 1065 return the multi-member will issue each individual owner their own K-1 form which will show each owner's share of everything (income, expenses, depreciation, etc.). Each owner will need that K-1 before they can even start their personal 1040 tax return. Information from the K-1 is entered into the personal TTX program and all data for residential rental real estate will end up on page 2 of the SCH E.

So either way, your rental stuff "still" gets reported on SCH E as a part of your personal tax return.

To complete the 1065 return you will have to purchase TurboTax Business, which is not the same as Home & Business. TurboTax Business is for the Windows operating system only. It's not available for MACs or as an online product. Windows only. You can get it at Scenario 2: Multi Member LLC  Just select the "Corporation/Partnership" button, then scroll down to see.