Real Estate Under LLC

[Seanz]

I have a rental property under an llc partnership. There is no other business or other properties under this llc. The llc was registered in state of Texas. Can my business partner and I file the income and cost under our personal tax return? Or should we issue schedule K-1 for ourselves and then file under personal tax? We are trying to make our tax simple. Thanks   

[AmeliesUncle · Accepted solution]

If you were trying to keep it simple, you shouldn't have formed the LLC.  😀

You need to file a separate Partnership return, and then the K-1s from the Partnership returns will be entered on your personal tax returns.

I recommend going to a tax professional for at least the first year for the Partnership return.

If you did not file an extension for the Partnership return, it is already 4 months late (soon to be 5 months late), with fairly large penalties.  This is another reason to go to the tax professional to try to abate those penalties.

Texas also may have a separate return/tax/fee for LLCs.

[DavidS127]

Because your LLC has more than one member, the "default" treatment by the IRS is a partnership that must file Form 1065 (U.S. Return of Partnership Income).  That Form 1065 will generate the K-1 forms each of the partners enter into their personal (Form 1040) tax returns.

You can do a Form 1065 tax return with TurboTax Business.

The other option for a multi-member LLC is to elect to be treated as a corporation, and file a corporate tax return (Form 1120 or Form 1120S).

[Carl]

We are trying to make our tax simple.

Unfortunately, you did exactly the opposite by forming an LLC and putting the rental property(s) in it. You have to complete a 1065 partnership return for 2019 and all rental income and expenses will be report on IRS Form 8825 as a part of that partnership return.

The partnership will issue each partner a K-1 and all the rental income/loss will be reported in box 2 of the K-1. Numbers could be in other boxes to. But nothing concerning the rental property will be in box 1.

When you enter the K-1 on the personal 1040 tax return, any and all data cocerning the rentals will be on page 2 of the SCH E.

Your carry over losses will remain with the partnership/LLC. They don't get carried over to the personal taxes until you either sell the property or disolve the LLC/partnership. If you disolve the LLC, any carry over losses will be transferred the personal return. But they still won't be "allowed" until you sell the property.