2020 tax strategy for scorp with 5 rental properties

[Mike Beall]

I have read several articles here about the benefits of scorp vs llc and I'm going to work towards a series llc to hold the properties in 2021. In early 2020, I started a multi-member LLC (2 members) and elected scorp status. I have some questions about best tax strategy to minimize taxes for 2020. I have 6 properties (single family homes and duplexes) that bring in about $90,000 gross rent / year. My wife and I live in one apartment of one of the duplexes. Currently, I am running everything through my personal account (working on getting business account setup and accounting software) and mortgages/expenses are paid through that account as well. My questions are:

- My wife is property manager. Should I pay her a salary? I will have to pay payroll taxes on this money but it reduces the income tax-wise in the scorp. 

- With only $90k in income, can I get away with only doing distributions to the two members (wife and I) or is that a red flag (I know it is not recommended but it should be a small portion of the income after expenses)? It is a Virginia LLC. If I need to pay salary as well, what is reasonable?

- I have plenty of capital & rental expenses, and mortgage interest in 2020, so that will definitely offset the rental income but what is the best strategy to minimize tax impact here?

Thanks,

MikeB

[Dan Schwartz]

@Mike Beall huge red flag that you are organized as an S Corp, but paying everything through your personal account. 

You also only have a few business days left to sort out payroll for 2020, if you haven’t already.  

$90,000 gross is a relatively meaningless metric here.  The net profit is what you need to be planning on/for. 

Hope you can sort all of this out before it’s too late.  Good luck!