It depends on the form and location of the LLC.
According to
the IRS, if an LLC is owned by husband and wife in a non-community
property state, the LLC should file as a partnership. LLCs owned by a husband
and wife are not eligible to be "qualified joint ventures" (which can
elect not be treated as partnerships) because they are state law entities.
If you are in a community property state ( Louisiana,
Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and
Wisconsin), you have a choice.
If there is a
qualified entity owned by a husband and wife as community property owners, and
they treat the entity as a:
- Disregarded entity for
federal tax purposes (a Schedule E filing for a rental property LLC), the Internal Revenue Service
will accept the position that the entity is disregarded for federal tax
purposes.
- Partnership for federal tax
purposes (a Form 1065 filing), the Internal Revenue Service will accept
the position that the entity is partnership for federal tax purposes.
A change in the
reporting position will be treated for federal tax purposes as a conversion of
the entity.
A business entity is a qualified entity if:
- The business entity is wholly
owned by a husband and wife as community property under the laws of a
state, a foreign country, or possession of the United States;
- No person other than one or
both spouses would be considered an owner for federal tax purposes; and
- The business entity is not
treated as a corporation under IRC §310.7701-2.
For more information
see Single
Member Limited Liability Companies
If the LLC is treated as a disregarded entity for US federal income tax purposes, you will include the
rental income and expenses on a Schedule E attached to your personal income
tax return and you would report the rental activities for the entire 2016 tax
year as if property was not transferred to an LLC. You do not need to indicate to the IRS
that the rental property was transferred to the LLC and can still use your SSN
on Schedule E when filing.
Once you have signed into your TurboTax Account (for
TurboTax Online sign-in, click Here , then select "Take Me to My Return"), type
"Schedule e" in the search bar then select "jump to Schedule
e".
If the LLC is NOT treated as a disregarded entity for US federal income tax purposes, you will need to be
reported on a separate federal income tax return (you will need TurboTax
Business, you can purchase a downloadable copy here
) If reported as a partnership (Form 1065), you
will need to include your K-1 from this partnership with your individual US
federal income tax return. In this situation, you would only report your rental
information on Schedule E up to the point when the rental property was
transferred to the multi-member LLC. Then you would need to file a business
return for the LLC based on your LLC's entity structure (Corp - 1120/1120S or
Partnership - 1065).
