Husband & Wife LLC Rental Purchase

if the LLC does not elect corporation taxation (unadvisable for rental real estate), 

the loan would be disregarded for income tax and gift tax purposes.

in a community property state each would report their share of the profit or loss in a separate column on schedule E. However, if you provide “substantial services” to short-term renters, the IRS says that the rental activity should be reported on Schedule C, and that the property owner must pay self-employment taxes on the income.

In non-community property states, you would file a partnership return because an LLC owned by both spouses does not qualify for the Qualified Joint Venture election. On the partnership return, you can treat the loan as such or treat it as a contribution to partners' capital (the way I would treat it). Again there are no tax consequences from making or repaying the loan. it is neither income to the partnership nor a deductible expense. What it does do is give you a tax basis to deduct losses.

start-up costs do not include the loan. amortization, if needed, starts with the month the activity begins which would normally be the month you put it out for rental

they include

1. survey of potential markets
2. advertising the availability of the property for rental
3. consulting or other professional fees paid in connection with starting this activity 
4. other pre-rental expenses

if they are not more than $50,000 you can expense the first $5,000 and amortize any remainder over 180 months 

if over $50,000 the first $5,000 is reduced $ for $ for the excess but not below zero. the balance is amortized over 180 months.  

they are reported on the tax form used to report the rental activity. 

Is the loan repayment tax free to us and a write-off for the LLC?

The principal paid on the outstanding loan is not reported on either tax return. Any interest paid on the loan, however, would be income to the lenders and interest expense to the LLC.

As Mike9241 stated, loans are not amortized. The principal of the loan is reduced by the loan payments for both entities.

We highly recommend that you consult a local tax professional and/or attorney before you move forward with this venture. There are significant tax issues that need to be addressed (including entity formation and loan structure) that could impact your tax situation for many years.