Sign Up

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
cancel
Showing results for 
Search instead for 
Did you mean: 
rubylove
Level 2

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!

1 Best answer

Accepted Solutions
Opus 17
Level 15

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.  

https://www.irs.gov/newsroom/heres-how-to-tell-the-difference-between-a-hobby-and-a-business-for-tax...

 

You are a flipper if you act like one.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

10 Replies
Mike9241
Level 15

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. 

NCperson
Level 15

Writing off LLC Costs on Home Flipped to Self

@rubylove if it is not as @Mike9241 suggests, then everyone in America would buy their homes through LLCs so they could write off the improvement costs...... 

TomD8
Level 15

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.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
Critter-3
Level 15

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. 

rubylove
Level 2

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! 

NCperson
Level 15

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...

Opus 17
Level 15

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. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
rubylove
Level 2

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. 

Critter-3
Level 15

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. 

Opus 17
Level 15

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.  

https://www.irs.gov/newsroom/heres-how-to-tell-the-difference-between-a-hobby-and-a-business-for-tax...

 

You are a flipper if you act like one.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Dynamic AdsDynamic Ads
Privacy Settings
v