How to handle single member LLC for rental properties with my wife and I as managers? Can I enter rental information as I have in the past with Turbo Tax?

[sveilleux6614]

How to handle single member LLC for rental properties with my wife and I as managers? Can I enter rental information as I have in the past with Turbo Tax? If I can, what about legal expenses relating to forming the LLC and what about expenses related to searching for more rental properties?

[MichaelL1 · Accepted solution]

Single member LLC can be reported on the Sch E, just like prior years in TurboTax.

Legal Expenses for forming LLC:  LLC members can deduct startup and organizational expenses incurred during a company's first year of operation. However, there is a limit—no more than $5,000 of these LLC expenses can be deducted. LLC members must reduce this deduction by an amount of total costs that are in excess of $50,000.

The search expenses are currently non-deductible however should be kept track of, as if you do buy the property they get added to cost basis for depreciation.

Once you close on a property, all prior travel and exploration costs will be added to the property's basis and depreciated over allowable life.

This link may be helpful also.

https://turbotax.intuit.com/tax-tips/rental-property/real-estate-tax-and-rental-property/L3e09vT71

EDITED: 1-21-2019 2:39 PM (CST)

[sveilleux6614]

Thank you, very helpful. Where would I add the one-time legal expenses?

[MichaelL1]

As long as below $5,000 as a Miscellaneous business expense.

[sveilleux6614]

So if I have 6 rentals I would divide the cost by 6 and include on each rental?

[TaxGuyBill]

Just to clarify, I think that @TurboTaxMichaelL1  may have made a 'typo'.  Rental properties go on Schedule "E" as in prior years.   They do NOT go on Schedule C (unless "services", such as maid service or meals, are provided to the tenants).

[MichaelL1]

Yes, you can allocate among the various rentals the start up legal fees.

[MichaelL1]

deleted comment 1-21-2019.

[TaxGuyBill]

No Michael, Material Participation has nothing to do with them going on Schedule C.  It only goes on Schedule C (for self employment tax) if "services" (such as maid service or meals) are provided to the tenants.

If services are not provided to the tenants, it goes on Schedule E, regardless if you Materially Participate or not.

[MichaelL1]

I'll edit and change to Sch E.

[MichaelL1]

Thank you