Deductions within sole proprietor LLC

[tarnish12]

My LLC has rental houses.  Income and expenses are shown on Schedule E.  Several charitable donations have been made through the LLC checking account.  I do not have sufficient deductions in excess of the standard deduction.  Can I deduct those donations under the LLC and take the standard exemption on my personal tax account?

[DavidD66 · Accepted solution]

No, you cannot.  They are not a business expense, and cannot be deducted by your LLC.  Charitable contributions made by a pass through entity (partnership, LLC, S-Corp) flow through to the taxpayer's return and are deductible on Schedule A, if the taxpayer/business owner itemizes.  If you don't itemize they are not otherwise deductible.

[Carl]

A single owner LLC reports income/expenses on SCH C as a physical part of your personal 1040 tax return. Likewise, rental real estate income/expenses are reported on SCH E of that same personal 1040 tax return. Income/expenses reported on SCH E have no impact or relationship to income/expenses reported on SCH C. Under no circumstances is residential rental real estate income/expeneses reported on SCH C. Therefore, if rental income is the absolute only source of income for your LLC, your SCH C will show ZERO dollars of income. Any deductions from the LLC will not be allowed since the LLC has no income on SCH C from which to deduct anything. You can claim them of course. But since they won't be allowed, they will have absolutely no impact on your tax liability.

Since a SCH C business is considered a disregarded entity by the IRS, you're better off claiming your donations under the Deductions & Credits tab in the Charitable Donations section. But that gets listed on SCH A as an itemized deduction. As you know, until your itemized deductions exceed your standard deductions, they too have absolutely no ipact on your tax liability either.