Living In Property Owned By LLC

[Michael Macaluso]

Hey everybody.

I bought a property in my LLC recently. Original plan was to fix up, rent, get some tax savings, and refi.

Turns out the house is in a great part of town local to us and we see ourselves living there.

The house has already been closed in the name of the LLC.

What is recommended for this situation and what’s the reasoning? Should I rent the property to myself or sell the property to myself, etc.

I would like to be able to use depreciation with the tax year coming to an end. However, I want to make sure I’m not doing anything illegal.

I appreciate any and all responses!

[Randall Alan]

@Michael Macaluso

A couple of stray thoughts for you. If you sell the property (regardless of whom to), you will pay all the fees and transfer taxes associated with that sale - likely thousands of dollars. I'm not from your state - but in Florida your taxable basis is established by your purchase price at the time of the sale. If you sell or transfer the property - that basis is re-evaluated at the time of the new sale and would likely increase - making your taxes higher. We also have homestead exemptions where I'm at - which an LLC isn't able to take advantage of - so I would investigate the benefits of that as well when considering selling it to yourself.

By renting the property and keeping it in the LLC you can take advantage of depreciation, as well as as mortgage interest. It also separates the property from you with regard to liability issues - so that is good as well. The LLC also gives you the ability to write off expenses associated with the property that you could not do as a personally owned house.

My 2 cents would be to leave it the way it is and not transfer it. It will be cheaper and give you more options to save money down the line. As long as it is a single member LLC you can just file it as a part of your personal taxes

All the best!

Randy

[Kerry Baird]

My husband and I started out holding properties in our own name, and later developed an LLC structure (which also moved to a new structure later on). I agree with the previous poster and for the same reasons. My lender won't allow me to occupy any of the properties they lend on, and which are owned by the LLCs.

Take a second look at what @Randall Alan said about the tax benefits of holding in an LLC. Taxes, as in not paying so much, have been a huge part of our success with properties.

[Basit Siddiqi]

If the property is a personal property used for personal purposes, there is no depreciation since its not a business asset.

There may be a chance that you have a home office within the home that is eligible for some write-off but you have to be using the home office towards a business activity.