My question is if we wanted to keep the property as a rental property, what kind of tax implications are there?
If you keep it you will have a rental to report on the Sch E on your personal tax return.
Should we create an LLC to keep the property separate from our personal tax situation? An LLC is not needed but if you do choose that route then a multimember LLC would be filed as a Partnership unless you choose to Incorporate. A separate return is filed for that entity and depending on what you do the rental may still pass thru to your personal return via a K-1 form.
Or would it be better to just sell the property and what kind of tax situation might that incur? I highly recommend you sit down with a local tax pro to explore your options, the costs and the pros/cons to each option and the fed/state tax consequences of each before you do anything. Having a good liability policy is a must as a landlord to protect your assets.
