AboutJohn Stancil, CPA Expertise I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I teach tax and accounting at a small church-related college. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a part time tax practice for over 30 years. I am a member of the AICPA, National Association of Tax Professionals, and the Institute of Management Accountants.
Visit my website at www.johnstancilcpa.com.
Also visit my blog, www.thetaxdocspot.com.
Experience I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CFM, and CIA. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I write a monthly tax column for the local newspaper. I have prepared taxes for over 30 years.
Education/Credentials DBA University of Memphis
MBA University of Georgia
BS in Accounting Mars Hill College
Question I plan to build a second home near the water via a bank construction loan. I plan to rent this home for weekend use, and to use it personally for more than 15 days per year. The rental income will cover only a portion of my expenses. I am considering buying and managing the property through a single-member Texas LLC for the liability protection. Do you recommend this approach?
Will I loose any of the federal tax benefits of second home ownership - ie, deduction of 100% of mortgage interest and property taxes?
Are there any other tax consequences - pro or con - of operating the my second home / rental vacation property through an LLC? Will the LLC allow me to write off any more rental expenses? Is the long term capital gain on a sale treated any differently?
Any other issues or concerns that I should be aware of?
Answer Tim,
Thanks for your question.
An LLC is a disregarded entity from an IRS perspective. This means that there is no such thing as an LLC return. LLC's elect to be taxed as a sole proprietorship, partnership, or corporation.
Therefore, from a tax standpoint, there is no reason to form an LLC. There may be other, non-tax, factors that would make an LLC a beneficial form of organization. For example, the limited liability protection.
Assuming you choose to have the LLC taxed as a sole propretorship, you would simply complete Schedule E of your 1040, reporting the LLC activities the same as if the organization did not exist and you were reporting it personally without the LLC.
