Tax benefits when buying in an LLC

[Dave Hart]

My current rentals are all in my personal name with conventional loans. As I grow (looking to buy #4), I'm exploring buying in an LLC with a DSCR loan. What I don't understand is how should I think about the tax benefits when holding rental property in an LLC. I love the current benefits to my personal tax return with depreciation and mortgage interest. Can I continue to get the tax benefits to my personal taxes if property is in an LLC? If not, I assume the LLC would then recognize those benefits, but I'm not sure how.

Anyone have an easy way to help understand this?

[David M.]

@Dave Hart There are no tax benefits to a LLC, unless investing with a non-spousal partner.

The taxation of the LLC will just about be always a "pass-thru" entity. In this case, the taxation actually occurs on your tax return. If you more than one owner/member in a LLC, the LLC will file a 1065 partnership return, but all that does is spit out a K-1 (like a w2 or 1099) showing the profit / loss that you need to report on your 1040 form.

If the LLC is single member, then you will basically continue file addition SchE for your long term rentals. single member LLC's are "disregarded entities" by the Federal IRS, which is to say that the IRS didn't bother to create another set of forms. Its an IRS tax status. By being "disregarded," it does NOT mean that the entity has no legal standing --- some people think the limited liability protection is reduced or not there because of this tax filing status.

Hope this helps.  Happy to chat.  Good luck.