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So as a follow up to this, I'm just curious:
1. Myself and my life partner (at the time), just business partner now, own a residential home with ourselves on the mortgage. We rent this property out through a popular short term rental company
2. We, along with one other business partner, own another rental income that is owned by the LLC, and is also rented out through a short term rental company.
I'm wondering if we can run the income and expenses from the personally owned property legally, through the LLC and if so, besides declaring the income and expenses on the LLC side, what the other tax/legal implications would be.
Thanks in advance for any help you can offer 🙂
I guess I should make it clear that for my personal properties I do not want to use a Schedule C I want to continue to use the schedule E.
Bottom line here.
Income from residential rental property is reported on SCH E *no* *matter* *what*. For a multi-member LLC (which files an IRS Form 1065 Partnership Return) it's reported on SCH E as a part of the 1065 return. The partnership will then issue each partner a K-1 that each partner will use to complete their personal 1040 tax return. (doesn't matter if it's a 1040 joint return either). All the rental stuff from the K-1 will end up on page 2 of the SCH E on the 1040 personal return.
From the sounds of it I can do that.
It's not like you have a choice in the matter, because you don't.
My other question is I do babiy sit and I do have to fill out a schedule C for, it is for mentally disabled individuals and New York state pays me. Would my Ein have to go on the schedule C which I fill out for that? I know your experience is in rental so you might not know the answer for that question.
Babysitting/care provider income is earned income. (unlike rental income which is passive income). So it gets reported on SCH C as a part of your personal tax return, assuming *YOU* are the *ONLY* owner of the babysitting/care provider business.
Assuming you registered the EIN as a baby sitting service or some kind of care provider, then the EIN is used on the SCH C where you will report that specific income. Overall, how you registred the EIN really doesn't matter "all that much", because the IRS could actually care less - so long as you report your business income and pay your taxes on it. Note that with the SCH C income, in addition to the "regular" income tax you will pay, you will also pay the additional 15.3% self-employment tax on that specific income too.
It's also possible the provider income might be exempt from reporting and taxes too, since the state pays it to you. But I don't know how that works in NY since I'm not at all familiar with NY state tax laws. You might want to ask a tax professional in that state if you need to even report it, and if so is it actually taxable income. I myself wouldn't have a clue on that.
@Carl Hi Carl, you are very knowledge on this topic of rentals. I have a question that I can't seem to find the answer.
I want to buy rental property in my name and report the income/loss on schedule E exactly as you recommend on multiple posts. However, I would like to use a business name (DBA) to collect rent. I don't need a separate EIN for the DBA and I can keep using my SSN. The DBA is just to open a business checking account and keep finance of the rental property separate from the personal one. So my tenant pays the rent to "ABC business" and I pay the mortgage from the "ABC business" checking account to the property in my name.
My question is, are there any tricks or gotchas in reporting all the expenses from the DBA business on the schedule E?
What are you expecting to gain by using a business name? For starters, a "business account" with a bank generally is not free. For those that do offer "free business checking" it does not pay interest on the account. Just do what I did. I opened a physically separate personal checking account in my and my wife's name (since we both own the property) and all rental transactions run through that account. I don't have any of those bull crap limits on transactions or check fees. Heck, even my checks are free if I ever get to a point where I need to get more.
So I ask again, why do you want to use a business name? I see absolutely nothing advantageous to that.
The business checking account is to look more professional I guess. The tenants can write checks for their rent to the business name rather than my own name. I'm not doing this to hide my name from the property. I realize that with some digging anyone can always find out who owns the property.
The person who is showing the house to the tenant can say that they work for "ABC business" and so that's where the rent goes.
There are business accounts with a lot of free services so getting a good account is probably not a problem.
I have a dozen or so rentals. So which is best that I should treat it like a business, and run it through a schedule C, and pay 15,3% SE taxes or through Schedule E, as an investment? It seems that having to pay Self Employment tax would be greater, than my schedule E expenses. Are there any advantages of being 67 y.o., or that my expenses reduce my income a whole lot?
RD
Please refer to this Turbo Tax link to determine the advantages and disadvantages of filing each. According to the IRS in this link, Schedule C is filed when other services are performed in conjunction with the property or if your rental "is part of a trade or business as a real estate dealer."
I believe the actual IRS words to distinguish this is "Materially Participate" aka provides services as in a hotel style and "Real Estate Professional" aka how much time is invested in conducting the rental business and you do it yourself no property management doing it for you. The average rental period can be a factor too in determining the above.
Absolutely horrendous advice!!
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