Rental Property LLC

[TexasBoy1962]

My Wife and I  have had a rental house for several years and used TT to file our taxes.  This year, we paid off the house and established an LLC for the property.  The LLC is owned by my wife and I and is registered in the state of Texas.  Establishing the LLC has raised a few questions for filing this year.  I'm hoping someone can help.

1) Which TurboTax do I need this year (Premier, Home & Business or Business)? 

2) I want to claim the cost establishing the LLC.  Do I just claim it as an expense under the property? If so, what category?

3) I know from reading several discussions that I don't need to file a schedule C since this is passive income.  That said, is there anything special I need to do besides filing my normal joint return?

Thanks for any advice you can provide!

[Anonymous_ · Accepted solution]

A multi-member LLC typically files Form 1065, which is supported by TurboTax Business (and none of the other TurboTax products).

However, since you live in a community property state and if you hold your interests in the LLC as community property, you have the option to treat the LLC as a disregarded entity and file the rental income and expenses on your individual income tax return (Form 1040 - Schedule E).

See https://www.irs.gov/pub/irs-drop/rp-02-69.pdf

The foregoing option would require filing one Schedule E for you and another Schedule E for your wife according to your interests.

[TexasBoy1962]

First, thanks you so much for the quick advice.  Unfortunately now I have another question.  Since the LLC will be considered a disregarded entity, does TT know I have to have individual Schedule Es for our joint return or do I need to somehow generate manually? Thanks in advance!

[Anonymous_]

TurboTax will not prepare separate schedules automatically, but you can easily provide the input for two separate schedules for the same property (e.g., one with 50% for you and another with 50% for your wife).

[TexasBoy1962]

Got it.  Thanks!

[Critter-3]

First putting the rental in an LLC was a waste of time and money especially if you did not retitle it to the LLC.  All you really needed was a good liability insurance policy which you need either way.  Since this is a spousal LLC you can simply continue filing the ONE Sch E like you have in the past ... no need to split it into 2 forms. 

[TexasBoy1962]

One more question, can I use Premier TT or do I need Home and Business.  Thanks again

[Anonymous_]

If you follow the Rev. Proc., linked to in my post above, two separate schedules need to be filed if the property is held in the name of a state law entity (e.g., an LLC).

[Anonymous_]

---

@TexasBoy1962 wrote:

One more question, can I use Premier TT or do I need Home and Business.  Thanks again

---

You can use any desktop version. If you want to prepare your return online, you can use Premier unless you have a Schedule C business.

[TexasBoy1962]

Not sure if it makes any difference but my property has been titles to our LLC and not us personally.

[Critter-3]

No difference ... it can be and should be considered a disreguarded entity ... keep using the Sch E like you always have done so.

[Anonymous_]

---

@TexasBoy1962 wrote:

Not sure if it makes any difference but my property has been titles to our LLC and not us personally.

---

If the property is titled in the name of the LLC (a state law entity), you have to refer to the provisions in the Rev. Proc. I cited.

[TexasBoy1962]

Thanks for all the advice.