Filing Taxes With Rental Property
Question: What is the best business entity for real estate with rental income?
I’m currently setup with an LLC on my rental properties. I want to keep the liability protection of an LLC, but have the ability of the business entity to file its own tax return and pay its own taxes while still taking advantage of the normal depreciation write offs and everything else. I want to be president of the business entity while taking a “0″ salary. Essentially I want any and all rental income to show under the business while I merely control it taking absolutely no income or salary personally.
Answer: You have the correct idea about the use of an LLC or other legal entity to protect yourself from potential legal problems. You may also pass this legal entity to your heirs or sell it as one as oppose to each individual property.
You might have to transfer the title deed to the LLC even though you are personally responsible for the monthly mortgage payment. Eventually the LLC will be able to qualify for mortgage programs as the LLC get stronger and is able to prove income and assets.
You would have to make sure that the LLC books and other legal things are kept current and separate from you personally. A good CPA would be instrumental in assisting you in doing this.
You may chose to give the president a salary, defer salary or no salary as you indicate.
A LLC protect you from potential legal problems even though you might have plenty or insurance. Having insurance do not protect you from potential lawsuits.
The LLC may file a separate income tax, take the depreciation or you may pass it through.
For tax and legal matters you should always consult with your tax consultant and attorney.
I hope this has been of some benefit to you, good luck.
“FIGHT ON”
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