September 13, 2022
Does LLC Save Taxes on Residential Property?
In this episode of Berry’s Bites, Chris Berry answers the question: Does LLC save taxes on residential property?
Estate Attorney and Advisor Chris Berry of Castle Wealth Group answers questions on retirement and estate planning every Wednesday at 1pm. Register via this link or give our office a call at 844-885-4200.
Castle Wealth Group and Christopher Berry help families with estate planning, elder law, retirement planning, and tax planning from their offices in Brighton, Ann Arbor, Livonia, Bloomfield Hills, and Novi.
Castle Wealth Group helps families with their legal, financial, and tax planning for their retirement and legacy.
With the use of legal structures like revocable living trusts, Castle Trusts (asset protection trusts), Chris Berry and Castle Wealth Group can help your family plan, protect, and preserve what is important through their Retirement and Legacy Blueprint Process.
Let’s say you set up LLC, does it save taxes on residential property, and what if LLC buys a residential lot? LLC’s. I like to think of them as a box what a LLC stands for is a limited liability company from our standpoint we set up a lot of LLC’s to limit liability.
Like let’s say you do have a rental we think of that as a hot asset where you could have a slip and fall and now they can come after you and whatever is in your name but if you’ve wrapped it inside of this box of an LLC it limits that liability to just what’s inside of the LLC. So whenever we have rental properties or second pieces of property I typically talk to clients about LLC as liability protection.
So if you have a rental or a second piece of property what we don’t do it is we don’t do it for homesteads so your personal residence we don’t want to put your primary residence into an LLC because it’s going to cause you some negative tax consequences, for now, it’s not homesteaded it could be potentially on caps but if you do have second pieces of property. We would look at the LLC strictly to limit the liability but that’s not really what the question’s asking. It’s asking is it going to save taxes versus having it just in your name I would say that the LLC big picture would be able to save you some taxes because now you could look at some business write-offs and different things like that.
It would be helpful from a tax perspective because now you could look at some more definitive business write-offs what if the LLC buys the lot for rental property again from a tax perspective it’s probably going to be beneficial I’m not sure how much it would move the needle per se but yeah now you have more of a definitive business and it’d be easier to write off taxes but really the big reason why we look at LLC’s for residential property.
Second pieces of property are just the nature of the LLC a limited liability company it’s limiting your liability so if someone comes after you they can only take what’s inside the LLC we do this with hunting cottages all the time or cottages up north rental properties like you have a slip and fall on one of those and that property is in your name granted you might have insurance but if they go over and above that insurance, you could be sol.
So by putting together that LLC you’re limiting that liability you’re building a wall around it versus like your insurance or umbrella coverage that’s kind of building sandbags but let’s say whatever the claim is is over whatever your insurance now they’re going to come after you but if it’s inside of the LLC it’s protected so that’s why we really like LLCs not so much from a tax perspective but more from just a limiting liability perspective. Thank you.