Tax Benefits to Building & Owning an ADU

[Ronak Patel]

Hi All -

Anyone have experience creating an LLC for building and managing a new ADU construction? Did you find it beneficial vs not creating the LLC or any type of pass through entity?

Listed some of the tax benefits you can receive while building an ADU and once the ADU is built from my research. Happy to learn if there are other tax benefits.

Tax Benefits While Building

- Create an LLC and pay start up costs through the LLC (architect fees, permit fees, etc.). You can also deduct the cost of creating the LLC. Up to $5K (Source: https://www.adugeeks.com/post/...) 

Tax Benefits Once Built

- Deduct depreciation and cost of maintaining the property 

- Deduct mortgage interest if a loan is taken out

[Joshua VanName]

Quote from @Ronak Patel:

Hi All -

Anyone have experience creating an LLC for building and managing a new ADU construction? Did you find it beneficial vs not creating the LLC or any type of pass through entity?

Listed some of the tax benefits you can receive while building an ADU and once the ADU is built from my research. Happy to learn if there are other tax benefits.

Tax Benefits While Building

- Create an LLC and pay start up costs through the LLC (architect fees, permit fees, etc.). You can also deduct the cost of creating the LLC. Up to $5K (Source: https://www.adugeeks.com/post/...) 

Tax Benefits Once Built

- Deduct depreciation and cost of maintaining the property 

- Deduct mortgage interest if a loan is taken out

While I am not an accountant, I do not see where it would save you much, if any money at all. I can expense all the fees you mention without creating an LLC.  You can also deduct depreciation, maintenance, and mortgage interest regardless of business structure.  

Sole proprietorship vs. LLC is more based on protecting personal assets from business liability.