It depends. Assuming if you are a single member LLC, here are some things to consider.
- Reporting Revenue and Expenses: Since the IRS treats single-member LLCs as disregarded entities by default, you would continue reporting rental income and expenses on Schedule E of your personal tax return. The LLC itself doesn't file a separate tax return unless you elect a different tax classification (e.g., S-Corp or C-Corp, or partnership).
- Handling the 50/50 Split: While you're still living in one unit, you can continue dividing expenses between personal and rental use, as you've been doing. If you move the rental-related expenses under the LLC, you could reimburse the LLC for the personal portion of shared expenses (e.g., utilities, maintenance). This keeps the LLC's finances separate, which is important for maintaining liability protection.
- Paying Rent to the LLC: Some people suggest paying rent to the LLC for the unit you occupy to formalize the arrangement. However, this isn't strictly necessary unless you want to create a clear landlord-tenant relationship with the LLC. If you choose not to pay rent, the LLC can still manage the rental side of the property while you handle the personal side separately.
- Transitioning to Full Rental Use: Once you move out and rent the entire property, all expenses and income would flow through the LLC. At that point, you wouldn't need to split expenses between personal and rental use anymore.
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