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Track capital contribution

I have a single member LLC for a rental property (small multifamily). Since this is a single member LLC, I don't need to file Form 1065, and doing everything on Sch E.

I wonder how to track the capital contribution to the LLC/rental property, such as down payment. AFAIK, the income from rental property will offset by the contribution before it is taxable (return of capital), but I cannot find how turbotax is tracking the capital I put into the property (down payment or money to cover repair)?

Thanks.

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1 Best answer

Accepted Solutions
Vanessa A
Employee Tax Expert

Track capital contribution

The LLC is completely irrelevant if you are a single member LLC.    When you are a single member LLC, it is considered a disregarded entity.  This means for everything tax wise, it is as if the LLC does not exist.  You will track everything as if you are an individual.  There is no return of capital, and no contributions.  What you paid for the property is your cost basis.  You would track this on a spread sheet or your own records.  

 

Your down payment is not deductible.  Repair costs would be entered as expenses. 

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3 Replies
Vanessa A
Employee Tax Expert

Track capital contribution

The LLC is completely irrelevant if you are a single member LLC.    When you are a single member LLC, it is considered a disregarded entity.  This means for everything tax wise, it is as if the LLC does not exist.  You will track everything as if you are an individual.  There is no return of capital, and no contributions.  What you paid for the property is your cost basis.  You would track this on a spread sheet or your own records.  

 

Your down payment is not deductible.  Repair costs would be entered as expenses. 

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Track capital contribution

@Vanessa A Thank you so much.

Basically, all the money contributed to the single member LLC should either show up as asset or expenses. 

Help me to understand the following example.

1. Buy a rental property in cash, the income after expense is $1000
2. Buy a rental property with 20% downpayment and a loan, the income after expense (including mortgage interest) is $0

They both have the same depreciation from the property value and there is no concept of return of capital, does that mean (2) is indeed better because mortgage expense will offset the net income?

Vanessa A
Employee Tax Expert

Track capital contribution

Yes and no.  Tax wise, yes, if you have a mortgage, your interest will offset your income which will result in lower taxes.

 

At the same time, if you are paying mortgage interest, you would actually have less profit because you are paying interest. 

 

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