If I have an LLC created in my state but a member of the LLC lives outside of my state, where do they pay taxes? Can both of us claim deductions for rent (Place of work)?

[Hi Palms]

member living out of state pays taxes in their home state and in the state the LLC does business but will get a credit in the home state.......both can deduct rent the LLC pays for its place of business.

[Critter]

A multi member LLC is taxed as a Partnership and the Partnership must file it's own return form 1065 BEFORE the members can file their own person returns since the each need the K-1 issued to them by the partnership.  The form 1065 is due 3/15 so if you have not yet filed the 2018 return it is now very late ... even if you put it on extension is was due 9/15 so it is still late.   

If this is something new to you the I HIGHLY recommend you seek local professional assistance to get your books set up properly and get educated on how to complete the first return...  after that if you fee comfortable with the 1065 then you can use the TT Business version to complete the partnership return. 

And the partnership deducts the rent paid for the business location on the form 1065  .... or are you referring to you each having your own OFFICE IN HOME expenses ? 

[hudsonshane64b]

When you say professional help, do you mean an Accountant or another professional? In addition yes, I am referring that we each have our own OFFICE IN HOME expenses (Rent, electricity, etc), can we count that as a deduction ? 

[hudsonshane64b]

When you say both can deduct rent. If the rent is set up in Connecticut and the person living Connecticut pays $1000/month, if the person in Louisiana pays $700/month, does the person from Louisiana deduct only the $700 for himself and the person in Connecticut deduct the $1000 for themselves, or does each person deduct their respective amount of rent, or does each person deduct $700 (so $1400 total) if the LLC is set up in Louisiana? 

Furthermore, will the credit amount to the difference in taxes ie if person A was suppose to pay $1500 (based on Louisiana income tax) in taxes and person B was suppose to pay $2000 (based on Connecticut income tax) in taxes but the LLC is setup in Louisiana, would person B pay $3500 total, but then be reimbursed by the state of Connecticut for $1500

[hudsonshane64b]

@Critter 

When you say both can deduct rent. If the rent is set up in Connecticut and the person living Connecticut pays $1000/month, if the person in Louisiana pays $700/month, does the person from Louisiana deduct only the $700 for himself and the person in Connecticut deduct the $1000 for themselves, or does each person deduct their respective amount of rent, or does each person deduct $700 (so $1400 total) if the LLC is set up in Louisiana? 

Furthermore, will the credit amount to the difference in taxes ie if person A was suppose to pay $1500 (based on Louisiana income tax) in taxes and person B was suppose to pay $2000 (based on Connecticut income tax) in taxes but the LLC is setup in Louisiana, would person B pay $3500 total, but then be reimbursed by the state of Connecticut for $1500

[hudsonshane64b]

@Critter 

Also, when you say professional help, do you mean an Accountant or another professional? In addition yes, I am referring that we each have our own OFFICE IN HOME expenses (Rent, electricity, etc), can we count that as a deduction ? 

[Critter]

If you need help setting up the books seek an accountant or bookkeeper ... if you need help with the tax return seek a CPA/EA/tax attorney.

For the OIH in a partnership there has to be a requirement in the partnership agreement stating the individual costs are required to be paid by the individual partners ... on the personal return this will be reported on the Sch E page 2 and NOT on the form 1065.