Where do I file my rental property purchases under an LLC? I bought two residential properties last year. Can I file the purchase as LLC expenses? Thank you.

[HelenC12]

Please clarify. Is your Limited Liability Company (LLC) a single member LLC, a partnership or a C Corporation? 

[phu]

It's a single member LLC. Thank you.

[DianeW777]

This will be reported on your individual return using the rental activity section of your tax return. Because you have a single member LLC (SMLLC) the IRS disregards this entity, meaning they do not expect any returns for this entity and all income is reported on your tax return.

Note: You must be using TurboTax Premier, Self-Employed, or Home & Business to enter income and expenses from a rental property you own.

If your rental property is located out-of-state, make sure you first set up that state properly in Personal Info. That way, when you do your state taxes, we'll be ready to go.

To enter your rental:

1. Open or continue your return, if you haven’t already
2. Locate the Search bar in the upper right of your screen. Search for rentals and select the Jump to link at the top of the search results
3. Answer Yes to the question Did you have any income from rentals or royalties?
4. On the next screen, What are you here to report?, select Rentals and Continue
   • If you have more than one rental property to report, no problem—just start with one, and we’ll come back to the other one(s) later
5. On the following screens, we'll ask you to enter all the info we need about your rental property, including: a description of the property, your rental income, any expenses and assets, and other less common situations about your rental
6. When you reach the Here’s your rental property info screen, double-check the info you entered to make sure everything is accurate and that you haven’t left anything out
7. Once you’ve entered all your info, you’ll be taken to the Your income screen
   • If you have more rentals to enter, scroll down to Rental Properties and Royalty Income (Sch E) and select Edit/Add next to this line
   • On the Your 2021 rentals and royalties summary screen, select Add another rental or royalty
   • From here, follow these instructions again, starting with Step 3, and repeat until you’ve entered all your rental income

Tip: Rent is considered income in the year you received it, not the year it applies to. This means that a rent payment for the month of January 2022 collected in December 2021 is reported on your 2021 return.

[Carl]

Nothing concerning long term residential rental real estate gets reported on a SCH C. It all gets reported on SCH E. So if this property is the only thing owned by the LLC, there is no need to complete a SCH C at all.

[phu]

Since IRS disregards LLC with a one-sole proprietor, should I file expenses for LLC filing and driving under my rental property expenses? Thank you.

[Carl]

Any and all expenses related to long term residential rental property are report on SCH E.  While it may be possible,  I don't know how to clarify that any better. Maybe the below will help?

SCH C income - A business reporting income/expences on SCH C is a business owned by own owner. It can be a sole proprietorship or a single member LLC that has not filed IRS form 2553 with the IRS to be treated "like an S-Corp" for tax purposes, or IRS Form 8832 to be treated "like a C-Corp" for tax purposes.

Income reported on SCH C is non-passive income, sometimes referred to as earned income. This type of income is paid to you when you go out and actually "do something" to earn it, or sell a physical product, or perform a service. That "something" may or may not be something that performed on a regular basis.

SCH E income - Passive income is reported on SCH E. Passive income can take several forms, such as dividends on stock investments, interest on a savings account or CD, as well as income derived from renting out real estate. It's the real estate rental income that gets reported on SCH E. This income is not "earned" in the since that you do not go out and "do something" to earn it. All you do is "sit there" and collect that income on a recurring basis - typically once a month.

Non-passive income that is reported on SCH C is subject to "regular" income tax, and the additional 15.3% self-employment tax. The SE tax is basically the employer's side of your medicare and social security.  This income can be included for things like figuring your maximum allowable IRA contributions, and is included when figuring your maximum social security payment when you reach retirement age.

Passive income reported on SCH E is subject to the "regular" ordinary income tax, but is not subject to the self-employment tax. Passive income can not be used when figuring your maximum allowable contribution to an IRA and is not included when figuring the amount of social security you will qualify to receive upon reaching retirement age.

[Anonymous_]

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@Carl wrote:

Passive income can take several forms, such as dividends on stock investments, interest on a savings account or CD, as well as income derived from renting out real estate....

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You really do need to get the definitions correct if you insist on posting the terms.

Passive income is income generated by a passive activity as defined in Section 469. Interest and dividends are not passive income (they are technically referred to as portfolio income) and, as such, cannot be offset by passive losses. 

In short, merely because "All you do is "sit there" and collect that income " does not necessarily mean the income is passive income.

Further, not all income on a Schedule C is necessarily nonpassive income.