I own rental properties which are divided in a few LLCs. I am the only member of each LLC. Each LLC owns 3 or 4 properties. The issue I am dealing with right now is that I am mixing all the rents and expenses. So I am on the process to separate all the bills and rents and start to collects rents in the correct bank account and pay bills from the bank account owns by each LLC. At the end What I am trying to avoid is commingling.
The accountant told me that my taxes needs to be done in the same way as I am doing right now, it means all the properties will be put on the schedule E and the LLCs will be ignore for tax purposes. My questions are:
1. Is this not commingling then? Even that I am separate all my rents and exprbses per proprietary per LLC, but then I am mixing them on my taxes. Is this the correct way to do my taxes on the assest protection point of view? Shall I do separate taxes per LLC even that I am the only member so I can avoid commingling?
2. I have a home office and use my car also for real estate. My CPA told me at the moment I deduce miles and put expenses of my home office on the taxes, then I am doing commingling. If that is true? Then how shall
I treat the miles and home Office expenses having multiple LLCs ?
As a single-member LLC, your business is treated like a Sole prop for tax purposes. This is the reason why you must complete Schedule E for all of your properties. While the CPA says that everything (income and expenses) will be combined on your tax return, I still think it is a good idea to keep things separate (as you are doing now). It will be a lot easier for you to determine profitability for each property if you have income and expenses separate and can run a profit and loss report for each property. At the end of the day, you can just provide a report for each property to your CPA and he/she can proceed to combine everything on the tax return.
As far as mileage driven and home office deductions, since you are using one vehicle and the same office for all of the properties I’m not quite sure if you can separate it, realistically. If I were you, I would also get a 2nd opinion from another CPA. I can actually refer you to someone who specializes in property management accounting and tax work. Send me an email at email@example.com if you’re interested.
Crystalynn Shelton, CPA
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