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Business & farm
A few observations first.
- This is a multi-member LLC that is filing IRS Form 1065-Partnership Return.
- The LLC was not "officially" open for business in 2019, since the LLC did not produce or attempt to produce one single penny of income in 2019
- The only thing the LLC will possess is Residential Rental Real Estate.
- For 2019, the LLC did not possess anything what-so-ever.
Understand the difference between passive income and non-passive income.
- Non-passive income: Sometimes referred to as earned income. This is income produced by you going out and "doing something" on a recurring basis to actually "earn" the income. This type of income is commonly reported on a W-2 or 1099-MISC. But as an owner/partner of a multi-member LLC under no circumstances and with no exceptions will you ever issue yourself a W-2 or 1099-MISC for this earned income.
- Passive income: For your situation, this would be rental income. To get this income you don't "do" anything on a recurring basis to get it. All you do is "sit there" and collect it every month. So this is a form (of many forms) of unearned income.
When dealing with rental property which produces passive income and incurs passive expenses, those expenses incurred in preparing the the property for rent that first time are *NOT* deductible in any way, form or fashion from the passive rental income. THey can only be deducted from earned income. So if the LLC's only source of income is passive income, any startup expenses incurred by the LLC can be claimed, but they can never be deducted from passive rental income. Period.
The below covers data entry for rental property on a tax return, as well as the different types of expenses incurred by rental property. It further illustrates what is and is not deductible, and what types of expenses have to be depreciated as opposed to expensed.
I've also included a "business type definitions" as a separate post in this thread. At the bottom of those definitions is pertinent information where some of it may (or may not) apply to your specific and explicit situation.
Rental Property Dates & Numbers That Matter.
Date of Conversion - If this was your primary residence before, then this date is the day AFTER you moved out.
In Service Date - This is the date a renter "could" have moved in. Usually, this date is the day you put the FOR RENT sign in the front yard.
Number of days Rented - the day count for this starts from the first day a renter "could" have moved in. That should be your "in service" date if you were asked for that. Vacant periods between renters count also PROVIDED you did not live in the house for one single day during said period of vacancy.
Days of Personal Use - This number will be a big fat ZERO. Read the screen. It's asking for the number of days you lived in the property AFTER you converted it to a rental. I seriously doubt (though it is possible) that you lived in the house (or space, if renting a part of your home) as your primary residence or 2nd home, after you converted it to a rental.
Business Use Percentage. 100%. I'll put that in words so there's no doubt I didn't make a typo here. One Hundred Percent. After you converted this property or space to rental use, it was one hundred percent business use. What you used it for prior to the date of conversion doesn't count.
RENTAL PROPERTY ASSETS, MAINTENANCE/CLEANING/REPAIRS DEFINED
Property Improvement.
Property improvements are expenses you incur that add value to the property. Expenses for this are entered in the Assets/Depreciation section and depreciated over time. Property improvements can be done at any time after your initial purchase of the property. It does not matter if it was your residence or a rental at the time of the improvement. It still adds value to the property.
To be classified as a property improvement, two criteria must be met:
1) The improvement must become "a material part of" the property. For example, remodeling the bathroom, new cabinets or appliances in the kitchen. New carpet. Replacing that old Central Air unit.
2) The improvement must add "real" value to the property. In other words, when the property is appraised by a qualified, certified, licensed property appraiser, he will appraise it at a higher value, than he would have without the improvements.
Cleaning & Maintenance
Those expenses incurred to maintain the rental property and it's assets in the useable condition the property and/or asset was designed and intended for. Routine cleaning and maintenance expenses are only deductible if they are incurred while the property is classified as a rental. Cleaning and maintenance expenses incurred in the process of preparing the property for rent are not deductible.
Repair
Those expenses incurred to return the property or it's assets to the same useable condition they were in, prior to the event that caused the property or asset to be unusable. Repair expenses incurred are only deductible if incurred while the property is classified as a rental. Repair costs incurred in the process of preparing the property for rent are not deductible.
Additional clarifications: Painting a room does not qualify as a property improvement. While the paint does become “a material part of” the property, from the perspective of a property appraiser, it doesn’t add “real value” to the property.
However, when you do something like convert the garage into a 3rd bedroom for example, making a 2 bedroom house into a 3 bedroom house adds “real value”. Of course, when you convert the garage to a bedroom, you’re going to paint it. But you will include the cost of painting as a part of the property improvement – not an expense separate from it.