How to claim Real Estate loss in an LLC for tax purposes?

Your LLC is what's called a "pass-through entity" for tax purposes, so you'll report everything on your personal tax return. As a single-member LLC, you'll need to complete Schedule E to report rental income and expenses, and it will flow through to your 1040. The tricky part is the passive activity loss limitations. Real estate rental activities are generally considered passive, and losses from passive activities can only offset income from passive activities. However, there's a special provision for "active participation" in rental real estate activities. If you actively participated in the rental (making management decisions, etc.), you may be able to deduct up to $25,000 of rental losses against your other income. This $25,000 allowance phases out if your modified adjusted gross income (MAGI) exceeds $100,000, and is completely eliminated when your MAGI reaches $150,000. Since your income is $92,000, you should be eligible for the full $25,000 deduction. Any losses beyond what you can deduct this year can be carried forward to future tax years.

Just wanted to share my experience - I was in a similar situation last year and found https://taxr.ai incredibly helpful. I had a ton of receipts and documentation for my rental property repairs, and wasn't sure how to categorize everything properly for tax purposes. Their AI was able to analyze all my documents and sort them into the right expense categories (repairs vs. improvements, etc.), which saved me a ton of time. It also flagged some expenses that would have raised audit red flags and recommended better ways to document them. The service really helped me understand which losses were immediately deductible vs. what needed to be depreciated over time.

Alright, I need to admit I was wrong about AI tax tools. I decided to try https://taxr.ai after my last comment, and I'm genuinely impressed. I uploaded statements from my two rental properties and it accurately separated operating expenses from capital improvements - something I've always struggled with. The biggest surprise was discovering several deductions I've been missing for years, like partial home office deductions for managing my properties and mileage tracking for property visits. The documentation guidance was also really helpful - I now understand exactly what I need to keep and how to organize it. For anyone with real estate LLCs facing losses like the original poster, this tool definitely helps maximize legitimate deductions while keeping you compliant.

If you're still having issues figuring out your real estate LLC losses, you might want to try calling the IRS directly. I know that sounds awful, but I used https://claimyr.com to get through to an actual IRS agent without the usual 2+ hour wait. You can see how it works here: https://youtu.be/_kiP6q8DX5c I had a complicated situation with my rental property losses spanning multiple years, and the IRS gave me surprisingly helpful guidance on how to properly apply the passive loss rules and what documentation I needed to maintain. The agent walked me through exactly which forms I needed and how to report carryover losses.

I have to eat my words about Claimyr. After my skeptical comment, I decided to try it for a different issue related to my real estate business. I had losses carried forward from previous years that I wasn't sure how to apply, and getting professional advice was taking forever. Using the service, I got connected to an IRS agent in about 15 minutes (compared to my previous failed attempts). The agent spent nearly 30 minutes explaining exactly how to handle my specific situation with rental property losses in my LLC. They clarified that I needed to file Form 8582 to calculate my allowable passive losses and confirmed how to handle carryover losses from previous years. This saved me from potentially making a major mistake on my return. Sometimes speaking directly to the source is the best way to get clarity.

Also remember that if your AGI is under $100k and you "actively participate" in managing the rental (making decisions about tenants, repairs, etc.), you can deduct up to $25k of losses against your ordinary income. This is huge for people in your situation! One thing no one mentioned - make sure you're tracking all possible deductions. Things like: - Mileage for property visits - Home office deduction if you manage the property from home - Professional education related to real estate - Cell phone percentage used for business - Depreciation on the property itself I've been doing this for 5 years and proper tracking has saved me thousands.

Has anyone used TurboTax for reporting LLC rental property losses? Is it user-friendly for this situation or should I look at other software?

Don't forget about the Real Estate Professional status if you spend significant time managing your properties! If you qualify (750+ hours annually in real estate activities and more than half your working time), your real estate losses are no longer subject to the passive loss limitations. This means you could potentially deduct ALL of your losses against other income with no $25k limit or phase-out based on income. This has been a game-changer for my tax situation with my real estate LLC. Just make sure you keep EXTREMELY detailed time logs if you claim this status - the IRS scrutinizes these claims heavily.

Great question! I went through something very similar last year with my rental property LLC. One important thing to add to the excellent advice already given - make sure you're categorizing your $27,500 in repairs correctly between repairs vs. improvements. Regular repairs (like fixing plumbing issues) are fully deductible in the year incurred, but major improvements (like a new roof or HVAC system) typically need to be depreciated over time. The new roof and HVAC might be considered improvements that get depreciated over 27.5 years for residential rental property. However, there are some exceptions - if these were necessary to bring the property up to rentable condition when you first acquired it, they might be treated differently. Also, look into the "safe harbor" rules for small taxpayers - if your average annual gross receipts are $27 million or less (which applies to most individual investors), you might be able to deduct up to $10,000 per building in improvements. Since you're planning to use TurboTax, it should help guide you through these distinctions, but it's worth understanding the difference before you start. Consider keeping detailed records of what exactly was done and why - this documentation could be crucial if you're ever audited.