Single Member LLC Tax Question
Hey, Im new here and I am confused on a few issues:
1) If I am the single owner of an LLC (disregarded entity) and the LLC owns a rental property, do I need to report rental income on a 1040 schedule E AND on a schedule C, or just one?
2) Would it be a better idea (tax-wise) to flip properties under my LLC or to record them under my name. Can I avoid the self-employment tax by not using my LLC for this purpose.
3) If I personally purchase a property and then my LLC does the rehab, am I still subject to a self-employment tax?[ Edited by NJCDrexel on Date 02/14/2005 ]
Quote:1) If I am the single owner of an LLC (disregarded entity) and the LLC owns a rental property, do I need to report rental income on a 1040 schedule E AND on a schedule C, or just one?No, your rental property operation is a passive income activity, so Schedule C is not required. Just report your rental income and expenses on Schedule E as if the LLC did not exist.
Quote:2) Would it be a better idea (tax-wise) to flip properties under my LLC or to record them under my name. Can I avoid the self-employment tax by not using my LLC for this purpose.Property flipping is an active income business, all your profits are taxable as ordinary income and subject to self-employment income taxes as well. It would be better, tax-wise, to flip property under a S-Corp. The self-employment income taxes can be managed a little better with an S-Corp than with a disregarded entity LLC (or your own name as a sole proprietor).
Quote:3) If I personally purchase a property and then my LLC does the rehab, am I still subject to a self-employment tax?Depends upon whether you pay the LLC to do the rehab. As the rehabber (for compensation), your LLC is in an active income business. If the LLC is a disregarded entity, then all your income and expenses flow through to Schedule C and your payroll taxes are calculated on Schedule SE.
Of course, you already know that rehab costs are not expenses for your rental property and are not deductions on Schedule E. Instead, rehab costs are added to your cost basis and recovered through depreciation.