I am hoping that someone can help me with this situation. I’ve tried to get an answer many times and not even the tax experts seem to give me a straight answer. I own 20 rentals and anticipate owing an additional 20 or so in the next few years. I also have a full time job. When I do my tax return, I report the rental activity for each single property using a schedule E. That has proved to be time consuming and even more complicated as I acquire more properties. One tax expert told me that there’s nothing wrong with that approach; I can own as many rentals as I like and report on Schedule E. Therefore, when I prepare my tax return for my regular job, I just include all the schedule Es. The properties are all owned by an LLC of which I am the single member. Some of the rents payments are made in my name and some in the name of the LLC. Here are the questions: Should I file a separate tax return for the LLC and not report on schedule E on my personal tax return? What happens if I decide to quit work and do this full time? Can I still file schedule Es or do I need to file a schedule C? Someone please please help me answer those questions. This is causing me some sleepness nights. Thanks a bunch.
Great question. Hard to answer though I am in your exact situation. In my state, LLC’s were a waste of money and provided no liability benefit or even reduced liability because the properties were no longer covered by “tenants by enteriety law” here in NC if Married.
All of mine are owned in both mine and my wifes name and filed on a schedule e which flows over to my regular full time job (and my wifes).
It made the most sense given my state and situation, the only way you can really get a good answer is to locate a CPA in your state that deals with rental properties a lot. Best way, investor club recommendation.
You asked what happens when I quit and do this full time. The biggest tax advantage to that is your no longer limited to the 25K dollar a year loss against your earned income when your a “real estate professional” meaning your sole source of income is now your rental properties.
If I am reading your post correctly and understand what you are asking…
Any rent that comes in and is paid directly to you should be listed under Schedule E of your personal tax return.
Any rent that comes in paid to your LLC should be accounted for under your LLC’s income.
My question is why aren’t you having all of your properties pay your LLC if they are owned by the LLC? This is what is going to cause you problems if I am reading your post correctly.
From there, you pay yourself OUT of your LLC and report what you pay yourself on your personal returns as income. This way you can also monitor how much you ‘pay yourself’ so you aren’t paying more personal tax than necessary.
:beer
From now on, definitely have all of your lease agreement? put into the name of your LLC.
The LLC doesn’t exist from a tax standpoint. A single member LLC uses the member’s personal return for filing. You would need a partner in order to file a partnership return or make a declaration with the IRS to have the LLC taxed as a corporation.
My leases are all done by a separate LLC, not the LLC that owns the property. This LLC is set up only to conduct leasing. Since I use my S.S. to receive section 8 payments, these payments are made and reporting under my name. The other payments are made to the LLC under which I rent properties. My understanding is that for a single member LLC, you are not required by the IRS to file under the LLC. For tax purposes, it does not really exist. For this reason, I report all my rental activities on schedule E when I file my regular tax return. I want to make sure that the way I am handling this is correct. As far as I know, this is the correct way.
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You do not need to use your S.S # to receive section 8 payments…just give them your llc tax ID and they would create a vendor ID…
If you do have a second llc set up to strictly do leases then when tax year comes , what income will this llc show income coming from??
I assume using schedule E is fine but time consuming…As another member suggested you could handle all your rentals from the llc,file taxes for the llc showing income from all your rentals and paying you dividents or a salary from gains or profits.Them file your personal 1040 showing the income you received on a 1099 from your llc.