what happens when we make an LLC owner of the house?
Basically, you just spend a fair amount of money doing the transfer. Since an LLC (single member or multi-member) is considered a disregarded entity, it basically provides no protection what-so-ever to the owner(s) from any legal litigation that may be initiated by a tenant. Then for a multi-member LLC you have to file a physically separate tax return with a physically separate program to prepare the 1065 return. That's more money being spent every year.
We formed an LLC to manage these properties.
So just exactly how does an LLC manage the property any different that you do? You have more paperwork to do which means you have to spend more of your time and money doing it. I'm not seeing any valid reason thus far, why you in your particular instance would want to do this. What's the benefit/gain?
There is also a new wrinkle in the tax code that allows businesses a tax-free 20% pass-through from income but this is not possible with schedule E
It most certainly is possible with SCH E income. Remember, rental income gets reported on SCH E *no* *matter* *what* kind of tax return you file - be it a personal 1040, a 1065 partnership/LLC return, an 1120 or 1120-S corporate return. It's still on SCH E and if you meet the requirements it does qualify for the QBI.
Now it's not easy to qualify for QBI with SCH E income. There's that 250 hours "directly involved" requirement. I myself have three rental properties and I"m telling ya right now, I'm amazed if I can actually reach 50 hours directly involved on all three properties combined. That would require me to spend on average, just over 4 hours per week actually doing something beneficial to the property or to the tenant. Time spent at home "keeping the books" doesn't count for the requirement either. Remember, a home office is not allowed for passive SCH E income.
