Someone else may have a better answer, but even if this is legal, I think it's a terrible idea.
As your personal home, you can deduct mortgage interest and property taxes. You can't deduct other expenses. But, when you sell, and assuming you have owned the home and lived there at least 2 of the last 5 years, you get to exclude $500,000 of capital gains from taxation.
So let's say you sell it to the LLC.That gives the LLC a certain cost basis as of the date of the sale. The LLC rents the home to you for the fair market rental value. That might be considerable higher than your mortgage payment, especially if you consider the FMV rental value with all utilities included. The LLC takes out a mortgage (because I can't even wrap my head around how you would transfer personal assets into the LLC sufficient to buy the house outright) and the LLC uses your rental payment to pay the mortgage, property taxes, utilities and liability insurance (but you have to pay for contents insurance separately). The LLC also deducts depreciation. If the LLC shows a profit, you pay income tax on the profit (you pay income tax on your rent payment). If the LLC shows a loss, you can deduct that as a NOL within certain limits. When the LLC sells the house, it pays depreciation recapture on the previous depreciation and it pays full capital gains tax on the rest.
But if you don't charge yourself fair market rental value, then you can only deduct expenses up to the amount of rent you collect, you can't show a loss.
I don't know about your house, but Zillow says that my house has an FMV rental (without utilities) of $1300 per month and my mortgage is $950. So if I were to sell my house to an LLC that I owned, that would be a fancy way of charging myself $1300/month in rent for the privilege of paying income tax on the "profit" (my own rent payment) and paying cap gains when I sell.
