Is Your Real Estate Protected? | USTaxAid

Diane Kennedy's Blog

Is Your Real Estate Protected?

Written by Diane Kennedy, CPA on February 7, 2020

Let’s face it. Chances are your real estate investment is $100,000 or more, in cash and debt that you’ve taken on. That’s a lot to lose due to a ridiculous lawsuit or tax lien.

Are you protecting your hard-won asset?

The best way to do that is with the right business structure. You need to pick the right business structure and then run it correctly.

It’s gotten more complicated with the Trump Tax Plan and the advent of vacation rentals like AirBnB. Don’t assume you have the right structure!

Let’s say you turn your long-term rental into a seasonal rental, like AirBnB. Did you realize you may need to change the business structure? Here’s just one example of how NOT following all the rules can come back to haunt you.

#1: You buy a property that is a long-term rental. Following the best practices, you set up an LLC to hold the property. If it’s just you as the owner, it’s a single member LLC and it’ll be reported on Schedule E. If you have a partner, it’s a multi-member LLC and you report it on a partnership return. Either way, you don’t elect other tax treatment. You use the default tax treatment.

You almost never want to have long-term rentals (passive real estate) inside of a corporation.

#2: Things change and you decide to turn the long-term rental into a short-term rental. We’ve considered that ourselves for one of our properties, so I really understand how that can happen.

The short-term rental is a business, NOT passive real estate. You may not realize that everything just changed.

#3:  If you continue to hold your short-term rental inside an LLC set up for a passive investment, you’ll pay an extra 15.3% self-employment tax.

That’s just one example of how important it is to check in on your business structures, at least annually.

My pledge to you is that I will do a review update on business structures once a year during the coaching sessions.

Your situation will change. Tax laws will change. You may need to make a change or addition right now and not even know about it until it’s too late.

That’s what we talked about on Wednesday, 2/5/2020, at 5 pm at our coaching session. Coaching sessions are the 1stand the 3rd Wednesday of each month.

This session was about business structures for real estate investments.

If you have a question about this or any other tax topic, you can ask live during the coaching session or better yet send an email to

If you’re not yet a member of the coaching class, please sign up at:

One Comment

  1. otis miller says:

    I need advice about structure. I want to open a new holding company to do business as in another name.
    I don’t want the name of the holding company to be know nor the owner.

    Can I do that in Florida ?
    I wanted a do a C Corp.

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