Real state Investments

[cabdu]

If I own real estate investments, tax wise, is better to have them under my name and my wife or under an LLC?
Asking because some of them may help when filing under our name (instead an LLC) with a potential loss. Thanks 

[KrisD15]

First, we would need a bit of clarity on what you mean by real estate investments.

Is this for rental on Schedule E or as a business on Schedule C or only investments?

Next, an LLC is a state recognized business entity, but you need to also choose a tax filing entity. 

An LLC can be a Partnership or S-Corp. If you are neither of these, you file as a sole-proprietorship, and that means Schedule C or Schedule E.

Having an LLC can give you more protection from liability. If you file as a Sole-Proprietorship, the tax liability flows to the taxpayer. Self-Employment tax is also calculated for the individual listed as owner of the LLC so only the owner gets their Social Security Account funded if Schedule C is used. 

Can you provide additional details concerning the real estate and your tax filing entity?

Did you file for these investments last year? If yes, how?

[Vanessa A]

Tax wise, in general it will not make any difference on your taxes as there is not a tax benefit to an LLC.  

If you file as an LLC, the LLC is a flow through.  This means all income that the LLC receives is distributed to the partners.  There are no retained earnings meaning if the LLC earns it, even if you do not distribute it, it is still basically taxed as though it has been distributed.  So if you and your wife are the only partners, you and your wife would claim 100% of the income split however you chose to split the ownership in the LLC.

This would be the same as if you are doing it under your names alone.

[cabdu]

Thanks, KrisD15. By real estate investments I mean Condos (apartments) and Single-Family home which currently are leased (that was the investment goal, so I guess it's what you meant by Schedule E)
For the last 4/5 years, since we acquired them (different acquisition dates for all), we have been filing them under our own name as "other incoming sources" in addition to our W2s.
I am aware having them under an LLC give us more protection from liability. However, I always wonder tax wise what's best. 
For different reasons, 1 or more properties can have loss, which is not bad at all (tax wise). But again, I wonder if that's the best way to filing them or having them under the LLC give some other benefits other than the liability... 

[RobertB4444]

The LLC doesn't provide much tax benefit versus the schedule E you are currently using.  

You can file a separate partnership return for the LLC and transfer all of the properties over to it and the tax rate may be a little lower.  But the paperwork hassle is a lot higher.  

The way that you have been filing is honestly a pretty common way to handle tax filing in your situation.  The schedule E avoids self-employment tax and lets you use the losses against regular income if you actively participate in the rentals.  

@cabdu 

[KrisD15]

Are you saying you HAVE been reporting the rentals on Schedule E or you have been entering the income/profit as "Other Income" ?

Did you list the building and land as rental assets? 

@cabdu