I will be forming my business as an LLC and want to specialized in real estate renting and holding property. I would appreciate examples on what kind of things i can deduct from taxes like company car suv, equpptment, things for my home office, business dinners, business travel? Also should i apply for a company credit card? Lastly, when i buy properties or obtain a mortgage do I buy it under my LLC? Thank you very much
ALL business expenses are deductible.
Vehicle expenses are deductible only for busines use, not personal use. Keep a detailed mileage log every time you get in the car. It’s the gold standard for determining how much you can deduct.
Meals and entertainment, write the who, what, why on the receipt as soon as you get home. Who you entertained, business purpose, etc.
Company credit card? sure. but use the company EIN and don’t use it for personal purchases.
Properties and mortgages in the LLC? sure. It’s preferred.
thank you very much for your help. Can you please explain me why it is a benefit to deduct all these things?
because if you don’t, then your taxable income will be higher, and you will pay more taxes.
income = revenue minus expenses.
what if for my first year i dont make a profit and break even or even loos money is it still a benefit to deduct all those expenses?
absolutely! depending on your tax elections they will either carry forward to offset future income or reduce your other current income.
Mark,
All advice you have given is true and very useful. My only problem is that lenders don’t like to lend money to LLC – they like personal name in title.
I have llc created but ended up purchasing a property on my personal name becuase of this. What do you suggest me doing? Can I ask lender to change the loan to llc? I don’t think they will like it… they will invoke DOS clause on me…
Help
DFW
First, you need a new lender that will finance to an LLC. They’re out there. Usually a personal guarantee is required, but that’s no big deal. Email me offline if you would like the name of my lender.
For now, the best you can do it put the property in a trust with the LLC as beneficiary.
I have run into the same problem with lenders, even local lenders. I also had one VP tell me that I should just go ahead and QCD it to my LLC after I get my loan. “After all it will be with FreddieMac on the secondary market and who would know?” That was scary. I told her I didn’t do business that way and thought they might pull the DOS clause out if I did. She just said again,“How will they find out?” Graciez
graciez there is nothing against the law about quit cliam deeding the property into your llc. The bank is not going to call a loan due if it is performing. It would not make sense. Read some articles on this website by William Bronchick. That should help you understand
in regard to quit claiming to LLC or having LLC on title, or getting loans with personal guarantee for LLC.
Title & Mortgage are 2 separate instruments. The mortgage is a promissory note or deed of trust for “said property” The title shows ownership of the property. It does not matter who owns the property…ie…who is on title. If the deed of conveyance violates the DOS clause, the lender “may” at its option call the loan due. Like the last post, if the loan is performing, usually the lender will not call it due. I have never heard of any lender anywhere call a loan due ever on a performing loan. But that is not to say that it has not or will not happen.
whoever guarantees the loan is the one with the problem. or at least until the foreclosure auction. the the person living in the property will probably have some bigger problems …
Wow interesting, I had always wondered this.
I bought two fixer uppers, I have rental income and positive cash flow but for 2006 I will be negative big time due to repairs, materials, legal and contractor fees. I have a full time career on top of this; does this mean when I file my taxes I still file all as one and my deductions for mileage and losses can help lower my personal income?
Also, assuming I have a 3 way partnership in my LLC does that mean I take 33% deductions instead of 100?
<< does this mean when I file my taxes I still file all as one and my deductions for mileage and losses can help lower my personal income?>>
Yes, it does mean that exactly…there are limits and personal income thresholds, though…I was able to take a $4000 paper loss against my rentals last year due to repairs and DEPRECIATION (don’t forget the depreciation!!!)…if it gets involved and convoluted, you should seek the advice/assistance of a tax professional.
Keith
the effect of LLC losses on your personal taxes depends on 1) how the LLC is being taxed and 2) your membership percentage.
The tax issues are where I get confused. The loans are in my name but I want to transfer the property to the LLC. When I file my tax return, does the interest for the loans go under the business as if it were in the business name or do I need to jugle numbers? My brain is hurting.
Greg
first, to an earlier post. a quitclaim deed doesn’t transfer title, it only releases (quits the claim) your claim to the title. to transfer title you need a general or warranty deed.
Greg,
interest goes to the business, as if the business has assumed the notes. if it ever becomes a problem, you show IRS the deed transferring the property. they don’t care who deducts it, as long as it’s only deducted once and is consistent with your business.
Thanks Mark,
That takes a load off my mind.
Greg
MCWagner,
I've read in numerous posts about the "personal guarantee" with lenders to lend to your LLC. 2 questions for you.
-
How does the “personal guarantee” actually affect you if the mortgage is under the name of an LLC. I would imagine the guarantee would still hold you liable if you were to become deliquent on the loan
-
What sort of history would YOUR lender be looking at to lend to an LLC. 2 years of tax returns? prior business? To someone looking to obtain financing on a new LLC with no business history, how hard is it to obtain financing?
Hopefully you can help to shed some light on this for me. Thanks!
- yep
- they qualify YOU on the loan, so whatever docs the lender wants/needs. but the loan is to THE COMPANY with you as guarantor.