Shift taxable personal income to business

[Raj Gandhi]

For purposes of reducing my personal taxable income, is it effective to run rental income & expenses through a business?  I need some of the rental income for personal household expenses which would be a salary (right?).  With a business, at least I'd be able to control the amount of income to myself vs. the business.

No, I don't have a business for the rentals yet because I'm avoiding any more financial complexity.  I only have one bank account and one credit card account and use Quicken reports for allocation.  I'd expect another bank account and another credit card for the business.  That will make sense most of the time but certain times it won't, like vacation trips that are also searching for rental property.

Due to the infamous 'due on sale' clause of lenders, it is unlikely that I'd transfer the rentals to the (LLC) business.

[Jai Reddy]

Raj, that's a loaded question, but I will give you an unloaded answer.

I use an LLC bank account, credit card, debit card for my rentals. This doesn't reduce any of my tax liability, but just makes it easier for me to separate the expenses, especially for audit purposes.

If I ever have to draw money from my rentals, I will draw it, the IRS doesn't care. What the IRS cares, is what you file a rental expense when you do your taxes. If you are audited, would you be able to prove that what you stated was a rental expense was indeed a rental expense?

A vacation trip for rental search may have only a portion of that trip directly attributable to the search as a valid rental expense. How I divvy it up is whatever helps me sleep at night, knowing that if I am audited, I can stand on firm ground with the proper evidence. If I am not able to clearly defend myself, to an imaginary IRS auditor, I will pass on those 'expenses'. Sometimes, it is not worth it, sometimes it is.