Hello! I am the sole owner of the LLC for rental property and file a schedule E. We have a loss on the properties and due to our income we carryover the loss. We recently took $10,000 in cash out of the business checking account and wrote the check to ourselves (Principle payment). Do we pay tax on the $10,000 as income?
Thank you in advance.
We don’t provide specific tax guidance in the forum because individual circumstances can vary widely. For a detailed answer to your question, be sure to speak with a licensed accountant.
That said, whether you owe taxes on your $10,000 disbursement will depend on a number of factors. The first thing to consider is whether you’ve made capital contributions to your LLC previously. Capital contributions to LLCs are not tax-deductible, but you are allowed to take money back out of your capital account tax-free. Alternatively, you can use your capital contributions to establish a cost basis in investment properties, which are offset against any capital gains when/if you sell a property.
Sorry we can’t provide more insight. For more information, be sure to speak with a licensed tax professional about your question – they can help you further.
Best of luck,