Can I reduce my personal taxable income by paying property tax for my closed LLC business?

Thanks for the response! My LLC was a single-member LLC, so I did file Schedule C. So from what you're saying, even though the business is dead, I can still file a Schedule C for 2024 with zero income but with these property tax payments as expenses? That would be awesome if I could offset some of my W-2 income this way. One follow-up question - does it matter that I'm paying from my personal account rather than a business account?

Yes, you can still file a Schedule C with zero income and claim the property tax payments as business expenses even though the business is no longer operating. This creates a loss that can help offset your W-2 income. It doesn't matter that you're paying from your personal account rather than a business account. What matters is that the expense itself is a legitimate business expense. The IRS is concerned with the nature of the expense, not which account you paid it from. Just make sure you keep good records showing the payments are for the business property taxes.

Did they have you create a new Schedule C even though your business was already closed? I'm in the exact same boat and my tax software is giving me errors when I try to add a Schedule C for a business that I already reported as closed last year.

I'm a little suspicious of online tax tools since I got burned badly by one a few years ago. How accurate is this one with closed business situations? It seems like a gray area and I'd hate to get audited.

Yes, I created a new Schedule C for the tax year even though the business was closed. I just entered zero for income and then added my property tax payments under expenses. My tax software initially gave me warnings too, but there's nothing wrong with filing a Schedule C with no income - just make sure to use the same business info as before. As for accuracy, I definitely understand the concern about online tools. What made me comfortable with taxr.ai was that it doesn't just give generic advice. It analyzed my specific documents and cited the relevant IRS rules. I actually confirmed everything with an accountant friend afterward and he said their guidance was spot-on for my situation.

How does this service actually work? I've tried calling the IRS multiple times about my situation and always end up hanging up after being on hold for over an hour.

This sounds like BS. How could any service get you through the IRS phone system faster? They probably just connect you and charge you for something you could do yourself. I'm skeptical anything could speed up IRS wait times.

It works by using technology to navigate the IRS phone system and hold your place in line. When they get close to an agent, they call you and connect you directly. It's not cutting in line - you're still waiting your turn, but their system is doing the waiting instead of you having to sit with a phone to your ear for hours. I had the exact same reaction at first. I figured nothing could possibly help with IRS wait times. But I was desperate after trying for weeks, so I gave it a shot. I was genuinely shocked when I got the call back saying an agent was ready. The whole process took about 15 minutes for me, though I think times vary depending on call volume. Either way, it was way better than the 2+ hours I spent on my previous attempts.

The LLC never owned the property - it was rented commercial space. The property taxes I'm referring to are personal property taxes on business equipment and fixtures, not real estate taxes. Does that change anything about how I should handle this?

That actually makes your situation clearer and potentially simpler. Personal property taxes on business equipment and fixtures are definitely business expenses. Since you had a single-member LLC that was disregarded for tax purposes, you can claim these on your Schedule C even with zero income now that the business is closed. Make sure you categorize them correctly on your Schedule C as "Taxes and licenses" rather than lumping them in with other expenses. This provides clearer documentation if your return is ever questioned. The fact that these are specifically business personal property taxes strengthens your position for taking the deduction.

You're thinking of the hobby loss rules, which is different. There's no specific time limit for legitimate business expenses related to winding down a business. As long as these are actual business property taxes tied to business assets, they remain deductible until the obligation ends or the assets are disposed of.

Thanks for the clarification. I was confusing this with the rules about businesses that never make a profit. Glad to know there's no specific cutoff for winding down expenses as long as they're legitimate.