My wife and I own a rental property as a two member LLC. Do I treat it as a partnership (Schedule K-1 and Form 1065) when married filing jointly, or is it Schedule E?

[maglib]

as an LLC is a disregarded entity normally in your situations, normally a Schedule E as most rental income is considered passive.  Unless it is an actively managed Short-Term rental with substantial substantial, hotel-style services (e.g., concierge, daily maid service) then it would be Schedule C.   Even if you materially participate, rentals are often still reported on Schedule E, which affects your ability to deduct losses. 

When you go through the interview note questions about material participation and especially the 750 hour rule (rule applies to 1 of you working 750 hours and note that is 25 weeks of 30 hours). The IRS has been auditing many who claim 750 hours so make sure to have documentation of work time in writing if you plan to claim it.

@mdkressin

[M-MTax]

---

@maglib wrote:

....an LLC is a disregarded entity....

---

An LLC is NOT a disregarded entity if it is a multi-member LLC, which defaults to a partnership (an election to be treated as a corporation is a possibility).

If (and only if) two married individuals, @mdkressin and wife, treat their interests as community property under the laws of a community property state, then they can treat the LLC as disregarded and each file a separate Schedule E for the rental property, splitting their interests on each form.

[maglib]

In this scenario it is a disregarded entity where the IRS ignores the entity and taxes the owner directly as Rentals are PASSIVE income. LLCs can also be taxed as partnerships (multi-member default), S Corporations, or C Corporations if they elect to file those returns using TT business.  Poster asked about a single rental owned by an LLC for a husband and wife.    Please don't complicate a simple question.

[M-MTax]

---

@maglib wrote:

Poster asked about a single rental owned by an LLC for a husband and wife.    Please don't complicate a simple question.

---

Please don't post. Your knowledge is deficient.

A married couple own who interests in an LLC must file a 1065 with associated K-1s UNLESS they hold their interests in the LLC as community property. The fact that this is a single rental is NOT relevant. The LLC is a multi-member LLC and requires that a 1065 be filed as multi-member LLCs default to partnerships, which file Form 1065.

See Rev. Proc. 2002-69: https://www.irs.gov/pub/irs-drop/rp-02-69.pdf

You're thinking of a married couple qualified joint venture but as explained below, LLCs do NOT qualify for that treatment:

A business owned and operated by the spouses through a limited liability company does not qualify for the election

Only businesses that are owned and operated by spouses as co-owners (and not in the name of a state law entity) qualify for the election. See Rev. Proc. 2002-69, 2002-2 C.B. 831, for special rules applicable to married couple state law entities in community property states.

https://www.irs.gov/businesses/small-businesses-self-employed/election-for-married-couples-unincorpo...