Originally posted by Tony Bc: We (husband and wife filing jointly) are looking for a CPA.

Failure to meet material participation rules will limit rental losses to offsetting passive income or carrying forward.This post does not create a CPA-Client relationship.

Please talk to your CPA.

Our CPA told us that we would not be able to deduct interest from a HELOC if the funds were used for anything other than improving the property in which the equity is the source of the loan.  

This is most of the depreciation you are taking year one.You can calculate your depreciation recapture by taking the sale price of the asset and subtracting the adjusted cost basis.The adjusted cost basis is what you paid for the asset plus any improvements you made along the way minus the depreciation you took along the way.The profit above this original cost is taxed as a capital gain, but the part linked to depreciation is taxed at a maximum rate of 25% under the unrecaptured gains of section 1250.To recap the tax rates are:- Sec. 1250 real property: 25%- Sec. 1245 property and 15 year 1250 property: Ordinary Tax RatesThere are ways to minimize depreciation recapture especially if you know how to work smart with your CPA.1) Asset Valuation at Time of Sale - Sellers can minimize recapture by reallocating the price of the assets on sale.

As a retired CPA, I saw plenty of tax returns by these firms that clearly were done poorly. 

What types of IRS/CPA approved payments are working well for rents to LLC entities to keep personal and business funds from co-mingling? 

@Brice Alef-Torrisi putting each property in its own LLC is usually overkill.Getting a bank account for each LLC is typically something you need to do to avoid "piercing of the LLC corporate veil" (actually depends on tax selection you made for LLC), but is also overkill.You haven't indicated how you are holding the deed for the latest property.If in your name or same LLC, you don't need a separate bank account.If in separate LLC, you can create a Master LLC, have each property LLC hire the Master LLC to manage their affairs, and just get a bank account for Master LLC.This is an opinion, not advice, so lookup CPA Frank Alcini in Troy for expert advice.

Hey @Nick Gallon Martin, I recommend speaking to a Tax Planner/CPA, @Jeff Nash would be a great resource for you.

For long-term planning, consider transferring the property into a trust to manage tax and legal complexities.This post does not create a CPA-Client relationship.