My husband and I set up a LLC intending to run our future real estate business through it in 2016. The first rental purchase was done in our own name (title, mtg, etc.) and we did not transfer it to the LLC name (fearing the Due on Transfer clause). We know we are not getting the liability protection of the LLC, but do have an umbrella policy. We paid all of the purchase cost with our own money and set up a separate bank account with a $10k balance to "start" our business. The LLC has a checking, savings, and separate savings accounts for rental deposits that all business income and expenses are run through. We brought our 2016 taxes to a professional to make sure that everything was set up correctly.

The tax preparer did our LLC taxes as partnership return with K-1s to both my husband and I. They ran all of the rental income and expenses (and depreciation) through the LLC partnership return. We know all losses and gains are then passed through to the partners to claim on their own income, and we did claim the K-1 info on our personal taxes (they prepared those taxes as well). Because we are full-time W2 income earners and not real estate professionals, we're carrying forward most years a pretty good-sized business loss.

I am questioning now if that should have been done. I'm reading a lot of articles and posts saying a LLC cannot deduct something it doesn't own, but wondering if because my husband and I are the owners of the LLC (thus all LLC members) are listed on the mortgage if that is why they thought it was appropriate? Or did they just do a lot of incorrect paperwork to charge us all that money? Please say no because they've done our taxes this way for the last three years.