Owner Occupied - Short Term Rental - Tax Deductions

[Austen Iverson]

Hello all, 

I have a house overlooking a lake in South Dakota. This is my primary residence & the mortgage is held personally on a 30 year note. I file for "owner occupied" status and have the mortgage interest fully/partially deducted on my tax returns. 

I found the demand for my house on short-term rental sites such as AirBnB & VRBO quite lucrative. I also have a single-member LLC with 5 other full time rental houses. I run my short-term rental business out of my personal house under my LLC, which I drew up a lease between that creates an agreement to pay for utilities, internet and common household products I need to function my business in exchange for the property. The only monthly bill my LLC doesn't pay for on my house is my monthly term installments for principal/interest/taxes.

Since my house is held personally, if I choose to have the LLC burden the payment to the bank, I'd have to declare that as "rental income". However, I'm looking into either Tenancy-In-Common (TIC) or Joint Tenancy-In-Common between myself & my LLC on the deed so the LLC can burden the payments.

If I get that switched over, then my personal income isn't affected (so I'm not paying post-tax dollars to my mortgage) & my LLC will show a loss, which will shield my personal income at the end of the year. But then when I go to sell the property down the road, I plan to use a 1031 to buy my next property. However, the payment would have been serviced by my LLC for X amount of years, which is 100% tax deductible.

Also, since it's still my full time residence, could I claim a portion of it to run/operate my LLC as my home office? What about mortgage interest deduction on the personal side? Seems far-fetched as it would be double dipping.

Thoughts? Has anyone else had experience with both their personal name and their LLC name on the deed of a property?

[Eamonn McElroy]

Why can't you make the house a rental and rent it to yourself for $1/month, then sublease it to AirBNB customers.

IRC Sec 262, IRC Sec 183, and IRC Sec 280A and the related regs may stand in your way.  Ignoring the internal revenue code, the judge-made-law substance-over-form doctrine and sham-transaction doctrine might also stand in your way.

But FWIW, you'll only have to "logic" your way out of it if you're examined or audited.  Logic doesn't always work in tax court, authoritative guidance does.  Good luck.