John_M
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« on: December 03, 2008, 04:27:29 AM » |
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I started an LLC this summer because I planned to rent my condo out earlier this year, and manage the rental income and maintenance costs through the LLC (it is a pass-through LLC). It turns out I won't be renting the condo out until next year, so i don't have any rental income to record. However, I did make home improvements this year to make the condo more rentable. Can those renovation costs be written off (meaning the LLC operated at a loss) even though there's no actual rental income yet?
thank you all for the responses... to answer some questions - I own the condo, not the LLC. The condo was not rented, or for rent during the time the repairs were made. Its incorporated in Washington DC... will I have some massive filing costs/expenses?
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botygy
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« Reply #1 on: December 03, 2008, 07:14:44 AM » |
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It depends. I think the bigger issue, though, is who owns the condo, you or the LLC?
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prescientone
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« Reply #2 on: December 03, 2008, 08:44:45 AM » |
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The Government will be looking for a return for the LLC. If you are the sole shareholder, you can file as a single member LLC and have the K1 flow through your personal return. You may not be able to deduct the losses, depending on the capital investment in the LLC. If you have other passive gains from other sources, you may be able to offset. Hire a good accountant, pay the fees and do the right thing
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Helen__EA_in_PA
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« Reply #3 on: December 03, 2008, 08:08:35 PM » |
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Was the condo available for rent while the repairs were being made? If not, they must be capitalized into the basis.
The other response about what is the entity of the LLC is important also. An LLC is a state animal and your state may require a return. If not a single member LLC, (disregarded entity), the IRS will also.
Helen, EA in PA
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Charles_G
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« Reply #4 on: December 07, 2008, 03:23:39 AM » |
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If you held the condo out for rent (advertised, put up a sign, etc.) then you need to claim the expenses on Sch-E of your 1040. If not, submit a zero return Sch-E.
A single person LLC the IRS regards as a disregarded entity (but I hear that may soon change). State laws may differ.
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bostonianinmo
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« Reply #5 on: December 07, 2008, 07:05:06 AM » |
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Frankly I'd scrap the LLC. You don't need it for what you are doing. It's a needless expense and complication, especially at the state level in some states. If you're in CA or NY, you'll be facing mandatory state filing requirements and minimum franchise fees as high as $800 even if you have no income. Other states have similar requirements.
The limited personal liability protection offered by an LLC is trumped by your insurance policy in most cases, and you can add a personal liability rider for a modest cost, much less than the minimum franchise fee in CA or NY.
I owned a number of properties for many years and never bothered with an LLC. Depending upon how you choose to be taxed, it can even cost you money in the long run.
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