Building a house for rental income. Should I form LLC?

[sweetrvr]

I'm building a carriage house on my property for rental income. (my property is zoned for 2 residences). It has been suggested that I form an LLC so I can claim the construction costs. Is this possible or recommended? 

[Critter]

All the construction costs are added together and will be the cost basis of the property which must be depreciated ... you cannot deduct those costs as expenses.

[TaxGuyBill · Accepted solution]

For income tax purposes, a Single Member LLC is treated exactly the same as if there was no LLC.  So a LLC would not change your income tax return.  However, depending on your State, there could be additional State taxes/fees due if an LLC exists (for example, California has an $800 annual fee).

In some cases, a LLC could provide some liability protection,*IF* everything is done exactly right.  If you are interested in that, you should contact a local business attorney in your area.  On the other hand, good insurance can usually do the same thing, and often cover you better than an LLC could.