If you are a real estate investor, then you're well aware of how saving every little dollar is key to being able to get into investing in your next fix and flip. Keeping your tax burdens low is one of the benefits associated with setting up a real estate limited liability company (LLC).
Real estate LLCs function a bit differently from other types of corporate formations. This incorporation structure exempts you from paying taxes that you may derive from your business dealings. If this sounds too good to be true, then you're not alone. There's an explanation for why you don't have to pay corporate taxes on the funds that your corporate LLC generates.
Real estate LLCs enjoy a pass-through tax break. This benefit was bestowed upon them by the Internal Revenue Service (IRS) in 1988.
IRS codes allow investors who have set up real estate LLCs to buy and sell their properties without having to pay both business and personal income taxes like other corporate entities have to do. Investors are instead only required to report their company's losses or profits on a personal tax return.
These unique tax filing regulations allow you to avoid the double taxation that other business entities have to pay. One of the great benefits of being able to disclose your profits and losses along with your income tax return is that it keeps your tax rate lower. You're also able to take deductions for expenses such as your mortgage when you file taxes for your sole-proprietor LLC.
Tax laws are ever-changing. This is why it's important that you consult with an attorney in Hollywood to discuss your Florida company's operations and what type of corporate structure is best for helping you achieve your goals. Work with a board-certified real estate attorney who has experience representing both residential and commercial experience. The insight that they can provide you with will greatly aid you in keeping more money in your pocket.