All Forum Posts by: Tony Christian

Hey Paul,

This is a great question, and it’s smart of you to dig deeper before trying something like this. Here’s why selling your primary residence to your LLC and then renting it back isn’t a good idea from a tax perspective:

1. Self-Dealing Doesn’t Work
   For tax purposes, a single-member LLC is considered the same as you, so paying rent to your own LLC is basically just paying yourself. The IRS won’t allow this as a legitimate deduction.
2. No Tax Benefit from Self-Rent
   Even if you set it up through an S-Corp (which is more complicated), the rent payments you make would be taxable income to the S-Corp. And since the S-Corp’s profits pass through to you, you’d still pay personal income tax on the rental income. In the end, it cancels out any benefit.
3. Loss of Key Homeowner Benefits
   If you sell your home to an LLC or S-Corp, you'll lose:

• $250k/$500k capital gains exclusion on selling a primary residence.
• Homestead exemption on property taxes.
• Owner-occupied insurance rates, which are cheaper than rental insurance.

1. Substance Over Form
   In tax law, the IRS looks at the substance of a transaction, not just the form. Selling to an entity you own and renting from yourself looks like a tax dodge to the IRS, and they’ll likely reject it.
2. Better Alternatives
   If you’re looking to maximize deductions, consider more straightforward strategies like:

• Renting out part of your home (like a basement or room) while still living there.
• Keeping clear records of home office expenses if you work from home.
• Investing in other rental properties that aren’t your primary residence.

Michael Plaks explained it really well in his response. There’s no real way to create phantom losses without running into issues with the IRS, and you could end up losing important tax benefits.

Here’s a clear and practical response:

Hi Noemi,

Congrats on setting up your LLC and series structure! You're definitely on the right track by planning to open separate bank accounts for each property and the holding company. This is crucial for keeping your finances organized and protecting your LLC’s liability status.

Here are some questions to ask when choosing a bank:

1. Fees and Minimum Balances

• Do they charge monthly maintenance fees?
• Is there a minimum balance required to avoid fees?
• Any fees for wire transfers or ACH payments?

1. Online Banking and Integrations

• Is the online banking platform user-friendly and reliable?
• Can it integrate with your bookkeeping software (like QuickBooks or a property management tool)?

1. Multiple Accounts Setup

• Will they allow you to open multiple business accounts under one LLC for each series?
• Are there any discounts or perks for maintaining multiple accounts?

1. Check-Writing and Payment Options

• Do they offer free checks or digital check-writing?
• Can you easily pay vendors and contractors online?

1. Customer Service and Support

• Is there a dedicated business banker you can reach out to?
• How responsive is their customer support?

Bank Recommendations:

• Chase and Bank of America are popular because of their extensive business banking features and integrations with bookkeeping tools.
• Smaller community banks or credit unions can offer more personalized service and lower fees, but make sure they support series LLCs.
• Online banks like Novo or Mercury are great for tech-savvy users who want low fees and easy online management.

What to Watch Out For:

• Hidden fees for transactions or deposits.
• Limitations on the number of accounts or ACH payments.
• Difficulty in maintaining clear separation between the series, which could risk the limited liability protection of your LLC.

Since you’re using a Series LLC structure, it’s crucial to keep each property’s finances completely separate to maintain liability protection. Also, make sure to record every transaction clearly to avoid any issues with the IRS or legal matters.

Hope this helps!

Hi Palak,

Congrats on your first rental property! Here’s what you need to know about using your cost segregation study:

If your CPA says your tax return is already going negative, it means you’re reporting a loss for the year. In that case, using the cost segregation study this year might not be necessary because the extra depreciation would just increase your loss, which you might not be able to fully use right now.

However, you have two options:

1. Use the Cost Segregation Now: This would increase your loss this year, and you could carry forward the unused loss to offset future rental income. This can be helpful if you expect your property to become profitable soon.
2. Save It for Later: If you don’t use it this year, you can save the depreciation for future years when you have more rental income. This could reduce your taxable income in those years.

Your decision depends on your long-term strategy. If you expect to have more rental income next year or from other properties, saving it might make more sense. But if you want to maximize your deductions now or plan to sell the property soon, then using it now could be better.

Also, if you or your spouse qualify as a Real Estate Professional for tax purposes, the losses could offset other income, like your W-2 salary. That could change the situation, so check with your CPA about that.

If you want more details about depreciation and cost segregation, check out the IRS guide on rental property deductions: IRS Rental Property Tax Guide.

Hope this helps! Good luck with your investment!

Hey Veronica,

Congrats on your first flip! Here’s how it works:

1. LLC Taxation for Flipping

Since you’re flipping the property in under 12 months, the IRS usually treats it as ordinary income because it’s considered a business activity, not a long-term investment. This means you’ll pay short-term capital gains tax at your regular income tax rate.

2. LLC Partnership Tax Filing

For an LLC partnership:

- The LLC itself doesn't pay federal income tax. Instead, it files a Partnership Tax Return (Form 1065).

- The profits are then “passed through” to you and your partner. You’ll each get a Schedule K-1 showing your share of the income.

- You both report your share on your personal tax returns and pay taxes based on your own tax rates.

3. Can You Be Considered an Investor LLC?

It’s tough if you’re flipping in under 12 months. To be considered an investor (and possibly get long-term capital gains rates), you’d need to hold the property for over a year as a rental or investment, not actively flip it.

Check out the IRS guide on rental real estate and capital gains for more details: IRS Rental Property Tax Guide.

You might want to talk to a CPA who specializes in real estate to see if there are any strategies that work for your situation.

Good luck on your flip!

Hey Brandon,

Great questions! Here’s a breakdown:

1. Can you count purchases made by friends/family as expenses?

Yes, as long as you reimburse them. If they buy something for your property and you pay them back, it’s just like you bought it yourself—so you can count it as an expense in your bookkeeping.

If they don’t get reimbursed, then technically it’s a gift/donation, and you can’t deduct it as an expense.

The IRS has a guide on rental income and deductions that might help: IRS Rental Property Tax Guide.

2. Trading proformas?

That sounds like a great idea! Seeing how others structure their numbers and track growth can be super helpful. Hopefully, someone here is open to sharing! If you want an easy way to visualize your rental finances, there are some solid bookkeeping apps and spreadsheets that can automate a lot of it.

Hey Juan,

Great question! Rental property taxes can be tricky, but you have a few solid options:

1. Do it yourself with TurboTax (or similar software)

If your rental is pretty simple (one property, basic income & expenses), you can learn the basics and still save money. TurboTax has rental property features, and the IRS has a great guide on rental income, deductions, and recordkeeping - IRS Rental Property Tax Guide.

https://www.irs.gov/businesses/small-businesses-self-employed/tips-on-rental-real-estate-income-deductions-and-recordkeeping

2. Hire an accountant—but maybe not for $6,000/year

A real estate tax pro can help you save money, but $6K a year is way too much unless you own multiple properties. Many CPAs charge $500-$1,500 for a rental tax return.

3. Find a balance

If you're open to learning, start with TurboTax this year and see how comfortable you feel. You can always have an accountant review your return for a lower fee (around $200-$300).

Biggest thing: Make sure you’re tracking all deductions (mortgage interest, depreciation, repairs, etc.). That’s where real savings happen!

Good luck!

Hey Desiree,

Great post! A lot of homeowners are unsure about selling, but the market is still moving.

1. Is now a good time to sell?

Yes! Home values have gone up a lot in the last few years. If you sell now, you’ll likely make a good profit.

2. Will I find a new home?

More homes are for sale now than last year—about 27% more! That means better options for buyers.

3. Are people still buying?

Absolutely! Even with higher mortgage rates, millions of homes were sold last year, and people are still looking to buy every day.

The market is balancing out, and mortgage rates might even drop a little in 2025. So if someone is thinking about selling, now is a good time to start planning!

Thanks for sharing this!

Absolutely not. Paying rent on time doesn’t erase dishonesty and lack of integrity. If she’s willing to steal a package on camera and still deny it, what else is she capable of?

A good tenant is more than just a rent check—they should respect your property, your rules, and the people around them. You don’t want someone who could cause legal issues, neighbor complaints, or worse.

There are plenty of qualified tenants out there who pay on time and don’t steal. Keep looking.

That doesn’t sound right to me. A property manager should always account for both income and expenses—you’re the owner, and you have a right to see exactly where your money is going.

It almost sounds like he thinks he’s doing you a favor instead of working on your behalf. In reality, he’s managing your investment, and part of that responsibility includes transparency and accountability.

At the very least, you should be getting invoices for any repair over a certain amount (say, $250 or whatever threshold you’re comfortable with). If he’s refusing to provide that, I’d take a close look at your management agreement to see what’s actually required.

If he keeps pushing back, that’s a red flag. You want a manager who respects that this is your asset, not theirs, and keeps you in the loop. Might be time to have a conversation about expectations—or consider other options if he’s not the right fit.

I've never ran one but as I understand it hot dog vending can be profitable...if it's done right.  Here's my view.  

you can probably net $300 a day more or less. 

• I would put the greatest energy in finding a prime location
  This more than anything would determine how much you make.
• Understand who would be  your best customer
  I would think it's someone who is in a hurry and doesn't have time to get a meal
• Pride yourself on a quality product
  It has to taste good to get repeat business.  Soft buns (sorry), etc.
• Watch your margins
  Buy at the best wholesale prices.
• Give outstanding customer service
  Don't just look like your average vendor.  Wear a polo shirt with your logo on it.  Have unique colors and designs to your cart.  Cater your presentation to the personalities of your primary demographics. 
• Reinvest
  Once one location is successful, get a contract on another.  train someone else to run it...and repeat.
• Come up with ideas that are out of the box
  Give discounts to repeat customers. Experiment
• Develop a system
  Try to cut prep time and clean up to a minimum.  look at how McDonalds operates.  There isn't a more efficient restaurant around.  They train high school kids with no experience how to run a billion

I see in front of a court house as a good example of a prime location.  Everyone is in a hurry.  You can't be late to court or back to work.  A busy downtown location would be great as well.