BEST TAX STRATEGY with W2, LLC and Partnerships!!!

BEST TAX STRATEGY with W2, LLC and Partnerships!!!

Investor · Orange County, CA · Member since 2020 · 85 posts · 19 votes

Hi guys, need help with our tax returns. We've been going back and forth with the lender and our accountant. We do have LLC; two houses in Huntington Beach with ADUs, STR in Big Bear under our name and our LLC and two STRs in Smokies with partners under two different partnerships per property. Goal is to purchase our primary residence in the future and both my husband and I have W2s. My question is, underwriter of our lender is saying to reflect all properties in our personal tax return schedule E page 1 and not in 8825 in the business returns. On the other hand, my accountant is saying once we do that since we've been filing everything through our LLC return in the past we don't have means to go back and we're putting ourselves at risk of being audited. He wanted to separate business returns from personal. Just wanted to see what everyone's doing when you have W2,LLC and partnerships. Do you put all your properties in schedule E page 1 or personal tax return or file separate through LLC and partnerships? What's the best way to maximize tax write off at the same time still get approved with future loans to upgrade our primary residence(looking to buy minimum of $1.5M worth of property)? Thoughts? Ideas? Experience? Any help or advice regarding this would be greatly appreciated. Thanks in advance guys!

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    3y

    The LLC is not saving you any taxes. But if you have a partnership (MMLLC) with a non-spousal partner, you have to file 1065.

    Underwriters don't like a property in 1065 because they have to use the K-1 amount (loss) for your DTI ratio. If it was under your Sch E, they can back out depreciation and one-time expenses that help with your DTI.

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  • Investor · Orange County, CA · Member since 2020 · 85 posts · 19 votes
    3y

    Thank you for your response Ashish. Our partnership is with my husband and two other partners. We cant file both 8825 under the business return and schedule E on our personal tax return? And once we do that route putting everything on schedule E it's hard to put it back in our LLC in the future. How about implication on our LLC and liability vs our personal assets? That's what I'm concern the most. If properties are in LLC then there would be at least separation of our personal asset and that of LLC. Thank you!

  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    3y

    File the returns correctly

    If you have a multi-member LLC, they require a partnership return to be filed where the rental activity would be filed under form 8825.
    The only exception is an LLC where the members are spouses and the LLC activity/business in a community property state.

    You would also report the activity on your individual return if the property is owned as tenants in common instead of through an LLC. However, it appears that it is owned through an LLC.

    Don't listen to your lender if he is telling you to do things incorrectly.

  • Investor · Orange County, CA · Member since 2020 · 85 posts · 19 votes
    3y

    @Basit Siddiqi, thank you for your response. Our LLC is just between my husband and I and partnerships are with us and partners. What's the right way to do it? Thanks in advance!

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