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Updated almost 4 years ago,

User Stats

23
Posts
11
Votes
Levi Koskan
  • Austin, TX
11
Votes |
23
Posts

LLC for tax purposes, W2 employee with RE, how to maximize

Levi Koskan
  • Austin, TX
Posted

Would love some thoughts and help with my situation, 

My wife and I make decent W2 income as our main source of money but we have two properties. 1 that is a rental, I have a property management company handling it, and then our 2nd has an ADU to which we actively manage an AirBnB that has done quite well.

Typically when doing taxes, things are straight forward being a W2 employee but do to raises my wife and I find ourselves in an income range that significantly reduces the RE tax advantages. (good problem to have) Due to us not hitting the necessary requirements to be deemed a Real Estate Professional ( we are < 750 hours) and our combined income being > than 150k, we don't get to credit any passive losses to offset earned income. In short, I feel like I'm investing quite bit into improvements and repairs and then still having to pay a sum of money for taxes. Applying different deprecation strategies to the improvements does not seem to make a difference.  
Source: 
https://www.therealestatecpa.c...
https://www.therealestatecpa.c...

I'm curious if setting up a property management LLC to mange my AirBnB would help with this situation? From a liability standpoint, I get it, it wouldn't provide a ton of protection, an umbrella policy is much better suited. This is about tax savings. Some of the things I would like to do, move my vehicles or any future vehicles over to the LLC and "lease" them to employees (me and wife), buy material goods such as ipads or other systems for the purpose of enhancing the AirBnB, paying for websites, marketing or other business operations. I could then use the negative pass through income to hopefully decrease my taxable income?

I need to know if this makes sense or if there is a better option or route. When to LLC or not is always a confusing subject and seems to be very situational so I'm sure there are a lot of W2 investors who also have this same question. If the answer is, go see a CPA, well I talked to one, they weren't awesome in giving me a direction but I would be more than willing to find the right one to get the guidance if ultimately that has to happen. 

Thanks for all the help, 

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