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Writing off LLC Costs on Home Flipped to Self
I purchased a home in the name of my LLC with a hard money fix and flip loan with the intentions of reselling. My sole member LLC incurred a great deal of expenses in renovations and carrying costs and then I decided to live in the house and keep it as primary residence. I refinanced the hard money loan with a personal mortgage, transferring ownership from the LLC to myself in the process. Can I deduct my expenses and carrying costs from the LLC related to this property when filing my schedule C on my taxes? I had another house flip and loan in action under the LLC during the same timeframe that I will be reporting income and deductions for. Thanks in advance!


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Writing off LLC Costs on Home Flipped to Self
I would think this is property converted to personal use so expenses are not deductible. capital expenditures would add to your basis.
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Writing off LLC Costs on Home Flipped to Self
@rubylove wrote: "I decided to live in the house and keep it as primary residence."
In that case nothing related to this property goes to Schedule C.
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Writing off LLC Costs on Home Flipped to Self
Agreed. Unless the single member LLC is incorporated the house purchase & improvement is consider done by you and is treated that way. You took a long route but basically you bought yourself a home and improved it prior to living in it. So it is treated as a personal residence purchase not a business "flip" to yourself.
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Writing off LLC Costs on Home Flipped to Self
Appreciate everyone's response, makes sense! However, just thinking about fact I did renovations, carrying costs, insurance ,etc in 2021 and refinance to myself until just now in 2022. I'm working off an extension to file and wouldn't have known I was keeping for self had I filed on time. That being said, are ANY of those operating costs write offs for the LLC for the year prior? Hard money loan fees, etc? Thank you!
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Writing off LLC Costs on Home Flipped to Self
can anything be written off? ...just the usual....(assuming you itemize)
- interest expense, amortization of points.
- real estate taxes
as stated by @Critter-3 , you just went the long way around to purchase a personal residence...
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Writing off LLC Costs on Home Flipped to Self
A single member LLC or sole proprietorship is a disregarded entity. You and the LLC are one taxpayer. You bought a personal home, and you paid utilities and so on for a few months while you fixed it up, then you moved in. Nothing about buying and owning your personal home is deductible on schedule C.
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Writing off LLC Costs on Home Flipped to Self
Thank you! I did purchase and truly flip another property under my llc. Do I need a schedule c with my personal taxes to report the income and deductions? It was a one off, but in name of LLC, does that mean will be taxed as a business? Please note I also flipped one house the year before, but under my personal name. Am I considered "a flipper?" I haven't filed taxes for that year yet and need to find an accountant, but truly has a loss.
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Writing off LLC Costs on Home Flipped to Self
If you registered the LLC with the state and got it an EIN for it then you have a flipping business which needs to be reported on a Sch C. If you just wanted to flip one investment property per tax year and not make this a business then this should all be done thru your SS# and is reported on a Sch D. Please talk to a local tax pro to get educated on what you did and what you should be doing.
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Writing off LLC Costs on Home Flipped to Self
@rubylove wrote:
Thank you! I did purchase and truly flip another property under my llc. Do I need a schedule c with my personal taxes to report the income and deductions? It was a one off, but in name of LLC, does that mean will be taxed as a business? Please note I also flipped one house the year before, but under my personal name. Am I considered "a flipper?" I haven't filed taxes for that year yet and need to find an accountant, but truly has a loss.
If you are an "ongoing trade or business" then you report on schedule C. If this is a hobby, you report on schedule D (capital gains).
Here is a quick summary of the differences
Ongoing trade or business | Hobby |
Net profit is subject to income tax and self-employment tax | Capital gains from the sale are subject to capital gains tax |
You can deduct carrying expenses (insurance, utilities) | You can't deduct carrying expenses |
Property tax is a business expense | Property tax is a schedule A itemized deduction subject to the $10,000 SALT cap |
Mortgage interest is a business expense | You can deduct mortgage interest as a schedule A itemized deduction on your main home (where you live) and one second home, up to an aggregate limit of $750,000 principal balance on all your mortgages |
Business income and expense is reported on schedule C | Many expenses are ignored. The cost of capital improvements is added to your cost basis, and your capital gain is calculated on schedule D. |
Your taxes are potentially higher as a business because of self-employment tax, but more of your expenses are deductible, and the SE tax gives you additional credits in the social security system.
If you classify a hobby as a business (becase you get more deductions) or if you classify a business as a hobby (to avoid self-employment tax) and then get audited, the IRS can reverse either decision. For a business they want to see evidence of "ongoing" business activity.
You are a flipper if you act like one.
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