We have passive income losses from rental properties occurred in 2024 and plan to rollover these passive losses in our personal tax return form 1040 (TT premier) for 2025 tax year due to depreciations and rental expenses were exceeding rental income. In 2025, we decided to put these properties in partnership LLC. However, I'm still getting form 1098 mortgage interest statements from lenders as expected. I didn't want to trigger a taxable event should I decide to transfer rentals into an LLC.
Question is should I continue filing rental income/expense/mortgage interests including prior year passive losses this year and form 1040 OR rollover rental passive losses including incurred last year expenses, depreciation and mortgage interests (while it is in my name) onto the new LLC and form 1065 (TT business)? I think the latter is quite confusing due to a) mortgage interests are in my name and b) passive losses from depreciation were previously reported at personal level return. My end goal is to avoid unnecessary risk from being audited.
