All Forum Posts by: Mia Taylor

Hi Connor,

If your projects are in South Carolina, you only need the LLC for asset protection for potential settlements or lawsuits. Your partnership can be set up at the parent level, with your entity first established in these top three states: DE, NV, and WY. These states offer privacy and charging order protection from creditors. A few other states offer some of these benefits, but not all. Second, your properties LLCs are recommended to set up in the state where your properties are located; these LLCs can be owned by your parent (ultimate) LLC.

Your partnership is a pass-through entity, so you will have to file taxes in the state where your properties are located and where you reside.

I hope this helps.

Hi Aidan,

These forms come with your Real Estate Attorney. These forms are drafted with your partnership agreement.

Hi Rick,

Yes you can deduct the HELOC mortgage expense for your rental only...not for your personal residence. The reason the answer is framed this way is because when you take a HELOC out to make repairs on your personal residence, you are allowed to tax the interest deduction on your Schedule A of your 1040 income tax return. However, because the HELOC's intent is for the rental property you own...you are allowed to take the mortgage interest on your Schedule E.

To your second question, the answer is Yes. You should receive a 1098 form from your mortgage provider.

Mia 

Hi Levi,

You only have one state filing requirement and that is MO. Your LLC set up in KS is for legal protection only. Once you begin doing business in KS, you will have a filing requirement in KS.

I hope this helps.

Mia

Hi Daniel,

Here are a few questions that can go along with a few strategies:

1. Depreciation Strategies: Am I maximizing depreciation deductions, and should I consider a cost segregation study to accelerate depreciation?

2. Passive Activity Losses: Are there ways to offset my W-2 income with rental losses, or do I need to qualify as a real estate professional for that to work?

3. Mortgage Interest Deductions: Are there any limitations on how much mortgage interest I can deduct for my rental properties?

4. Short-Term vs. Long-Term Rental Rules: Even though my properties are long-term rentals, are there any tax benefits I might be missing if I occasionally rent them short-term?

5. Self-Employment Opportunities: Would it make sense to start a side business related to my rental properties (such as property management) to access more deductions?

6. Retirement Account Contributions: Given my W-2 income and rental income, what are the best retirement accounts to contribute to for tax efficiency?

7. Legal Entity Considerations: Should I hold my rental properties in an LLC or trust for liability and tax benefits, or does it not make a difference for me?

8. 1031 Exchanges: If I sell one of my properties, what steps do I need to take to defer taxes using a 1031 exchange?

9. Estate & Inheritance Planning: What should I do now to minimize taxes for my heirs if I plan to pass down these rental properties?

10. Capital Gains & Exit Strategies: If I decide to sell in the future, what are the best ways to reduce capital gains taxes?

I hope this helps.

Mia 

Again...a blanket LLC doesn't really answer the question regarding what a pass-through entity is and how to report it...a Single Member LLC is not recognized by the IRS where income pass-through to your individual income tax return. The LLC is simply used for asset protection at the end of the day. Yes, you should consider an LLC for real estate due to favorable state law asset protection status.

Hey there Brian, and welcome to the world of real estate tax strategy! You're asking the right questions upfront, which is a great sign that you're serious about turning your rental property into a true business rather than just an investment.

You mentioned having a long-term rental...the long-term rental strategy would apply to your rental activity. Questions to ask during a consultation with a tax strategist could be "What other rental strategies could I use to help offset my W-2 income?" or "I'm not looking to offset W-2 income however, I'm looking for long-term growth strategies...are their other strategies I could do that could help me build a portfolio to strengthen my retirement income?"

I do not recall the question of what type of legal structure you should consider. However, considering your risk tolerance would dictate the type of legal structure you should consider. Therefore, a direct answer to this type of question...if asked would be it depends because you have to consider state law. 

I hope this helps.

Mia