Should I buy my primary residence through an LLC to maximize tax write-offs for renovations?

How would the IRS even know that I'm renting to myself? I can just create an LLC with a different name that doesn't obviously connect to me, right? And wouldn't major renovations count as repairs if they're fixing already broken stuff like those old cabinets?

The IRS would know because you must disclose related-party transactions on your tax returns. Creating an LLC under a different name doesn't change the fact that you own it - that would need to be reported on various tax forms. Attempting to disguise this relationship could constitute tax fraud. Regarding renovations, the IRS makes a clear distinction between repairs and improvements. Repairs maintain property in its current condition (fixing a broken cabinet door), while improvements add value or extend useful life (replacing all cabinets). Most of what you described - new cabinets, appliances, hardwood floors - would be classified as improvements that must be capitalized and depreciated over 27.5 years for residential rental property, not deducted immediately.

Thanks for the detailed response. I didn't realize mortgage lenders would charge higher rates or potentially reject this approach entirely. That alone might make this financially unviable. About the hobby loss rules - how many consecutive years of losses would typically trigger IRS scrutiny? Since I'd be paying myself market rent and deducting improvements, I imagine the LLC would show losses for several years. I knew about losing the capital gains exclusion, which I thought would be fine given the stagnant market, but you're right that markets can change unexpectedly.

Does taxr.ai actually give you actionable advice or just analyze documents? I've used tax software that claims to find deductions but usually just tells me stuff I already know. How specific was their advice for your situation?

I'm skeptical about these tax analysis services. Don't they just use the same rules and calculations that a regular CPA would? How much did it cost you and was it really worth it compared to just talking to a tax professional for an hour?

They give extremely specific, actionable advice based on your documents and situation. For example, they identified that three of my planned renovations could be structured as repairs rather than improvements with proper documentation, saving me nearly $2,000 in the first year alone. They also provided template documents for tracking expenses properly to support tax positions. The difference from a regular CPA consultation is the depth of analysis. They ran multiple scenarios with different approaches (LLC, direct ownership, HELOC, cash-out refinance) and showed the tax implications of each over a 5-year period. Their algorithms caught several deductions my previous accountant had missed related to home office and business use that were completely legitimate.

Wait, so this service just calls the IRS for you? Why would I pay someone else to make a phone call I could make myself? Sounds like a waste of money when you could just keep calling until you get through.

I don't trust these services that claim to connect you with the IRS. How do you know they're actually getting you through to real IRS agents and not just some call center people pretending? Plus, you're giving your phone number to a third party. Seems sketchy.

They don't just call - they navigate the entire phone tree and hold system. Last time I tried calling the IRS myself, I spent over 3 hours on hold before getting disconnected. With Claimyr, I submitted my request and went about my day. They texted when they reached an agent, then connected me directly. No more wasting half a day on hold. They don't pretend to be you or ask for any personal tax information - they simply navigate the hold system until they reach an agent, then connect you. You're always speaking directly to the actual IRS yourself, so there's no middleman involved in your tax conversation. You can verify you're speaking to a real IRS agent by asking them to confirm their badge number and division.

The HELOC idea is interesting and much simpler. Would the interest be deductible immediately or only when I file taxes after completing the renovations? And does it matter if the renovations are purely cosmetic vs. necessary repairs? I didn't consider the extra complexity with state filing fees and commercial insurance. Are those typically substantial costs?

The interest on a HELOC is deductible in the year you pay it, as long as the funds were used for buying, building, or substantially improving the home that secures the loan. The IRS doesn't distinguish between cosmetic improvements versus necessary repairs for this deduction - both qualify as long as they're genuine improvements to the home (not maintenance or repairs). Regarding complexity costs, they vary by state but can be substantial. LLC filing fees range from $50-$800 annually depending on your state. Commercial insurance typically runs 15-30% higher than residential coverage. Some cities also charge business license fees for rental properties. Then there's the cost of preparing an additional tax return for the LLC (Form 1065) which might cost $500+ annually with an accountant. These expenses add up quickly and often negate the tax benefits for a single property.

I thought the Tax Cuts & Jobs Act limited SALT deductions to $10k? If property taxes are high in OP's area, wouldn't the LLC structure help get around that limitation?

Good point about the SALT limitation! However, the LLC rental structure doesn't actually help circumvent the $10k SALT cap. Property taxes paid by the LLC would still be subject to the same limitations when they flow through to your personal return via Schedule E. The IRS specifically addressed this in guidance following the Tax Cuts and Jobs Act. The LLC rental income and expenses (including property taxes) would be reported on Schedule E, but the property tax portion would still count toward your overall SALT limitation. Some states tried to create workarounds with "passthrough entity taxes," but these are complex and don't apply to single-member LLCs anyway. So unfortunately, the LLC structure won't help you get around the $10k SALT cap - you'd still be limited to the same deduction whether you own the property personally or through an LLC.