Claiming Depreciation in LLC vs. Personally Owned

[Robert Lockwood]

My most recent tax filing made me more aware than ever of the potential benefits of claiming depreciation.  I've since sold that single family rental and have a contract on another in my area, near Denham Springs, Louisiana. 

Before I have an attorney draft the LLC, I'd like to know if there are any added difficulties in claiming depreciation if the property is owned by an LLC rather than personally held. I've started reading Landlording On Autopilot by Mike Butler and he discussed earned income (LLC) vs. passive income and the tax implications of both.  My hazard policy includes substantial liability coverage, so I'm wondering if I'll be causing myself more trouble than it's worth by transferring ownership to an LLC.  Logic suggests that transferring ownership to another entity would prevent me from realizing any personal tax benefits.  Any tax-filing advice from those more experienced than me would be much appreciated.

There are countless threads here of LLC vs. umbrella policy so I'm not really looking to debate that.

Can I claim the depreciation of a property held in an LLC? Also, I'm just looking for advice; any formal consulting will come from my tax/legal professional.

Best, -Robert

[Robert Leonard]

@Robert Lockwood there is no effect on your ability to take the depreciation deduction in an LLC. The default form of LLC in LA is a "pass through entity" and all of the taxation and tax benefits pass through the LLC to you personally. The property will go on your schedule E, just like any property that you own in your own name. The liabilities of the LLC remain with the LLC (when operated properly) and that is where the asset protection benefit comes from. As I understand it, that is the best option for buy and hold real estate investments in LA.

The second option is to elect taxation as an S Corp at the time of formation of the LLC. That gets a bit more complicated and is best suited for "trading" real estate (wholesales or flipping). While that wasn't part of your question, it's just something to be aware of. If you want to do some of that type of "trading," ask your tax advisor about the difference in how it would be taxed.