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I recently bought a triplex and live in one of the units, do I need to set up an LLC to deduct expenses for the rental units?

Everett, WA |

I would like to deduct a home office, repairs, etc. but don't know if I need to set up a business first. If so, do I need to do this before purchasing items I would later like to deduct?

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Attorney answers 2


You should consult with an attorney and/or tax advisor. It is usually beneficial for people who own rental properties to set up an LLC or other entity for many reasons including liability protection and the ability to deduct business expenses. If you bought the property already you also need to consider if forming an entity and transferring the property will result in a transfer tax - this is why we often advise clients to set up the LLC first and purchase via the LLC to avoid double transfer tax but check with an expert on WA real estate transfers.

This is not legal advice nor intended to create an attorney-client relationship. The information provided here is informational in nature only. This attorney may not be licensed in the jurisdiction which you have a question about so the answer could be only general in nature. Visit Steve Zelinger's website:

Robert M Lorey

Robert M Lorey


I concur with Mr. Zelinger's comments above. The primary issue which you may encounter is the transfer tax -- you would in essence be selling or giving your interest in the property to the newly created LLC. An expert in the field of real estate transfers may be able to craft a solution of "fractional share" transfer agreement to avoid most of the tax burden which you otherwise might owe. In such an arrangement, you would give or sell part of your interest to the LLC in small portions over several years. This will likely limit your ability to deduce some of your expenses. That is where the expert part comes in; the balance between transfer tax and deductions. Good luck!


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