Robertson & Gable, LLC has many real estate investors that call in to set up LLCs for their rental real estate. Many times it is a husband and wife that want joint ownership (50-50) of the new LLC. This is not always best. The IRS Real Estate Professional Designation can significantly change your plan for percent ownership of your real estate holdings.
Why Real Estate Professional Designation?
As a real estate professional, you are able to deduct 100% of your rental depreciation and “losses” against ANY other type of income on the front page of your 1040. Imagine if one of you has a well-paying full-time job with a large tax obligation, and the other spouse either works part time, has a small home based business, is retired, or stays at home. “Available time” and “material participation” in the business are two tests for the IRS. If one spouse is able to qualify as a Real Estate Professional, it can make a significant difference in your tax returns each year. You can eliminate the need to carry over losses and you can eliminate the phase-out rules if your modified adjusted income exceeds a certain amount. If one spouse qualifies, they would have the lion’s share percentage of the real estate LLC. Your tax professional can fully explain the benefits and requirements of becoming a Designated Real Estate Professional and why 50-50 may not be best.
The law firm of Robertson & Gable, LLC has been helping Georgia businesses since 1984 and specializing in forming Georgia corporations and LLCs since 1994. We have set up more than 60,000 Georgia businesses over the last 20+ years. Let us help incorporate yours.