I want to buy a 4/3 house live in 1 room and rent out the other 3 for 2 years and then sell for a profit. My question is should i use an entity or just insurance? If i do buisness in the house its tax deductable would this cancel out the taxes from the entity. All in all i want to make a profit and have protection.
If you are renting a portion of the house out, you can take the tax deductions for the percentage of the house that is used as income property…
What are you going to try to ‘protect’ yourself from?
I want to protect my other money in other investments.
I didn’t ask what you want to protect, I asked what you want protection from…?
Specifically, what protection do you think entity will provide you?
From what I know you can take the same tax write offs whether or not you occupy one room or all of them, if your are referring to your write offs on interest expenses. The part of taxes that is most often effected by the percentage of the home that is owner occupied vs rented is homestead exempition, but in all of the cases that I have seen if the home is single family the owner will take 100% homestead exemption regardless of what percentage they plan on renting out. You are supposed to claim the income brought in by your tenants on your taxes, but that income is usually offset by the interest expense.
Depending on how much your spending on a home, your interest expense may not even be high enough to justify not taking your standard deduction.
From a liability standpoint, instead of using an llc you may think about just putting umbrella policy over your home. I put a 2 million dollar over my 30 some units for only $180 yr. In some states if you put your home in an llc you are not able to represent yourself in court, which can be quite costly if you are evicting very often
I want protection from them going to court and taking more then just that house.
Thanks for the tax info, but im going to pay income tax on the rent so wouldnt it be a good idea to use the deduction for working inside my own home to lower the income tax?
Also do you get a good tax deduction for doing 720 hours of real estate a year?