Tax on a rental property income

[main0stage]

I currently own a rental property and 95% of the rent is taxable. I am looking at further real estate investment that might become source of income in future. With that in mind, what if i purchase second rental property, using loans, and then combine the two rental properties under a single (business) entity, so that my net-net income drops and hence i dont pay as much to uncle sam. Is this as slam dunk as i think or am i missing something?

[Bsch4477]

No problem having one business entity comprised of multiple entities. But each property should have its own income, expenses and depreciation reported. 

[Mike9241]

What type of business entity? A single-member LLC presents no income tax issues. Can't say the same for an S-corporation. In a SMLLC the mortgage debt is included in your tax basis. Not so for an S-Corp, only investment and direct loans from the shareholder count towards their tax basis  so if a property produces losses there can be limitations on what you can deduct. Also, be aware that unless you are a real estate professional losses on rental real estate is subject to the passive activity loss rules. 

[Critter-3 · Accepted solution]

You are overthinking this ... do NOT incorporate immediately until you do your homework.

If you are reporting the rental on the personal return now using the Sch E then a second rental will also go on the Sch E and  both of them net each other out automatically ... no need to open a business to do the same exact thing.