Filing taxes, single member llc, personally owned rental

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Filing taxes, single member llc, personally owned rental

Nathan Piercy
Porter, TX · Member since 2017 · 7 posts · 2 votes

Hi all, 

Here is my situation:

1) Married, filing jointly, living in Texas

2) We, married couple, owns the rental property in our personal name (also in Texas)

3) We route all rent income and other craft related income received for small business thru an LLC. We also have a separate business checking account used for income/expenses.

Do i file a Schedule E for the rent property but also a Schedule C for the LLC? Or how does that work? Should the rent income be on the Schedule E and maybe other income on the Schedule C from the small business?

Thanks!

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Eamonn McElroy
Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
7y

@Victor N.

Not necessarily...as it's solely husband-wife ownership in the LLC and they're in a community property state (TX), they can elect disregarded entity status per Rev Proc 2002-69 and avoid the partnership return.

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    7y

    @Nathan Piercy , 

    Yes, 

    Schedule E for the rental activity

    Schedule C for your Single member LLC's business activity.

    I know you said you record the rental income in the LLC too, but that might be good from a legal standpoint. You are defeating the whole purpose of LLC for your small business. Keep rental and SM separate.

    If needed, get LLC for each rental. Talk to your attorney.

    Since you have to report both activities separate, now you do additional bookkeeping to separate what you have combined. 

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  • Victor N.
    Investor · Wellington, KS · Member since 2016 · 256 posts · 188 votes
    7y
    @Ashish Acharya If you both own membership interests in the LLC and elect to tax it as a partnership rather than a corporation, you must file a 1065 partnership return and not report the income and expenses on your personal Schedules C and E. The partnership will then give you K-1s which end up on your personal return. Ashish is correct if only one of you owns the LLC and it is treated as a disregarded entity.
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  • Eamonn McElroy
    Accountant · Atlanta, GA · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Victor N.

    Not necessarily...as it's solely husband-wife ownership in the LLC and they're in a community property state (TX), they can elect disregarded entity status per Rev Proc 2002-69 and avoid the partnership return.

    2Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    7y

    @Nathan Piercy

    You should file a Schedule E related to the rental activities.
    Should should file schedule C related to the craft related income.

    You should consult with an attorney - having the title in your personal name and collecting rent in an LLC may potentially risk your limited liability protection.

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  • Nathan Piercy
    OP
    Porter, TX · Member since 2017 · 7 posts · 2 votes
    7y

    Thank you all for the replies - my goal is to get the property in the LLC but it's catch 22 with obtaining a loan for the home in the first place.

    So even though I've been keeping my financial records combined, I'll need to separate the income/expenses out into the Sched. E and C depending on where they land. Thanks!

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  • Victor N.
    Investor · Wellington, KS · Member since 2016 · 256 posts · 188 votes
    7y
    @Ashish Acharya @Eamonn McElroy. Good catch. I didn't notice the OP's state with my early morning eyes. I agree.
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  • Natalie KolodijBusiness Member
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    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    7y

    I would stop running ANY of the rental income into the craft related LLC.

    There is literally no benefit to this- and it could likely pierce your corporate veil far more easily. 

    The purpose of the rental in an LLC = Asset protection.


    Your rental isn't in an LLC.

    But now if you ever were sued by a venor or such related to your craft business, it could open up your rental to liability too. (I'm not an attorney- so check with one...but keep your separate businesses separate)

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