If I have a single member LLC with three rental properties what form do I file?

[taxboy]

I formed an LLC in 2015. I started using in 2016 and quit claim deed three residential rental properties into the LLC in 2016. The properties were purchased in 2012-2015. I have always claimed taxes on the Schedule E. Now that the properties are in the LLC what form do file? thanks.

[AmandaR1]

It sounds like you would file schedule E, like you've been doing because putting the rental properties into the LLC doesn't change anything for taxes. You need to actually "Materially Participate" to file schedule C and rental activity being reported on schedule C is a risky place to report it over schedule E, which is intended for rental activity. Alternatively, you can be able to essentially treat the activity as schedule C activity if you qualify as a real estate professional, which the software asks you about at the start of the "Rental Property" income section (and has in the past as well).

Your LLC is a disregarded entity for taxes; which means there's no tax form for your LLC to file. Instead, if you're one member (owner) LLC, then you default to be taxed as self-employed. If you have two plus owners, then you default to be taxed as a partnership. The LLC is for legal purposes to separate losses (lawsuits) from personal assets.

The IRS explains more about this differentiation here: https://www.irs.gov/taxtopics/tc414.html
Read more in the schedule C instructions by searching for "Rental" and "Material participation" and read all the resulting sections in order (you'll get a better grasp on the issues): https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

[taxboy]

Thanks for this information. I am not currently a real estate professional. That being said I am learning to become a realtor. Will this suddenly chang the way my real estate investments will be taxed (move from schedule e to c?)

I do plan to have a partner join me at some point. I would just switch from the schedule E to the LLC partnership return at that point?

[AmandaR1]

No, it's about materially participation and providing services in excess of normal rental activities (such as a bed and breakfast). Why do you want it on schedule C?

[taxboy]

I don't have a preference, just want it done correctly. Looks like Schedule E in this case. So if i have a bank account in the LLC's name and have the homes deeded to an LLC the name of my LLC still does not appear anywhere on my tax return? I am fine with that, just confirming that would be the case.

[AmandaR1]

Yes, with a second partner you have to file a partnership return first, then enter your schedule K-1 from the partnership and the info will flow through to your schedule E. You define many things through the partnership agreement that affect taxes.

[AmandaR1]

Fabulous reason. That's correct, you'll not have the name of the LLC on the return if your only activity is filed as a rental. The LLC business structure came more recently to make it easier for small businesses to gain legal protection. People were forming more complex businesses and not following the rules, which is why the simpler single owner LLC was made the way it is. A partnership does add a substantial level of complexity, and with that flexibility, although most people don't plan it well. Those features are really legal though and only access through a lawyer specializing in partnership for holding rentals.