Can I deed properties in my name, claim income to LLC, and write off LLC business expenses?

Forum|Forum|6 years ago
June 5, 2019
12 replies
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My business is buying rental property. I deed properties in my own name. The rent is deposited to the LLC bank acct. Can the LLC claim the income? The reason I care is that there are lots of business expenses (office equipment, vehicle expenses, etc.) that I'd like to write off, but it looks a bit fishy if my LLC shows no income.

You might say that I should write these items off on my Schedule E on my personal tax return. Many write offs don't fall under a specific property address that I own, but rather are general expenses required to research, acquire, and rent property. How do I write off "business" expenses for a business that has no income?

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TaxGuyBill

Employee

I agree with Opus.

So in direct answer to your question, "no".  It seems to us that your LLC doesn't have any income or expenses.  It doesn't own the property.

Although there have been some rulings that if the proper contracts are in place, you could hypothetically do it the way you are trying to do.  However, there would be no purpose in going through the legal work to do that.  It would be a lot of work and expense to set that up, and you still probably wouldn't have the "Limited Liability" that a LLC has (which is the purpose of the LLC).

For now, report the rentals on Schedule E (page 1) of your personal tax return.  If you want protection of Liability, get a good insurance policy for that.

If you want the rentals in the LLC, you need to transfer ownership to the LLC.  The would mean transferring the Titles, Mortgages, etc..  Also, the LLC would need to be registered in each State that is operates in.

As for the 'shared' expenses, just divide them up and allocate them between the properties.

Clarkjd

You’re not alone in wondering this. My question would be if this is a single person LLC would the taxes pass through to my personal return so whether it was depreciation or MI it would ultimately be the same? That was I can at least show income to the LLC and possibly purchase through it next time?

Carl11_2

Employee

My question would be if this is a single person LLC would the taxes pass through to my personal return so whether it was depreciation or MI it would ultimately be the same?

A single member LLC is considered a disregarded entity by the IRS. All income/expenses for a single member LLC are reported on SCH C as a part of your personal 1040 tax return. However, residential rental real estate produces passive income. So it's not reported on SCH C. All rental income/expenses get reported on SCH E as a part of your personal 1040 tax return. Nothing concerning the rental property would be reported on SCH C. So if rental property is all you have in the LLC, you have no need to file a SCH C at all.

The only way you would report rental income/expenses on SCH C, is if you are "in the business" of renting property and you provide substantial services that are directly beneficial to the tenants on a recurring basis.In other words, your rental activity would have to qualify as a "trade or business" per IRS rules. The IRS defines a trade or business at https://www.irs.gov/charities-non-profits/trade-or-business-defined The typical long term residential rental real estate does not meet that definition.

Clarkjd

Thank you @Carl11_2 , My follow up question is that since the properties are in my personal name, and if I had the LLC set up as a "Property Management" with an operating agreement between myself and the LLC. Could the write offs from expenses of the rental property that are expensed by the LLC pass through to my personal return, and then I be able to write off interest and depreciation on my own 1040 (that's not passed through from LLC). I can have an umbrella policy for coverage, but would like to show some income to the LLC to be able to purchase properties through the LLC in the future with out losing tax benefits from the property. Thank yo again for your help.