Quote:
Originally Posted by twoblack9s
Question in relation to the new tax law. I own a rental property (condo) as well my own condo in Michigan. I am considering selling the investment property as I have owned it for several years, it has seen good appreciation, etc. But am also considering holding it for a few more years.
In relation to taxes, I do not currently have it as part of an LLC (I know I should). My total personal tax deductions last year were about $11,500, which includes mainly the taxes and interest on the two properties that I have. I am single and no kids, and the standard deduction will double to $12k this year. Am I now losing a lot of of the tax incentive that I have to hang onto this property being that I am losing the ability to write off the taxes and mortgage interest? Well, not really “losing” it but it doesn’t affect my current tax situation as I likely won’t have enough tax write offs to exceed the standard deduction.
Would putting this into an LLC change this?
Thanks.
I'm not a tax professional, but have done a lot of real estate investing...
You should see no difference in your tax burden regardless of whether the property is in an LLC or held personally. The mortgage interest and taxes are both fully deductible, even when held in your personal name -- these are business deductions, not personal deductions. That said, depending on the specifics, you may have to spread any losses over multiple years, given passive loss rules (talk to a tax professional about your specific situation).
You'll also have to recapture depreciation when you sell, regardless of whether you took depreciation during your ownership (hopefully you did).
Another option is a 1031 exchange. If you'll be re-investing the proceeds into another rental property, you may be able to delay capital gains tax on any profits this way. Just something to consider.