Hello 

 

The question often arises, “Should I put my house into an LLC?”  The short answer is no. 

 

You are probably thinking that the house would be protected in the LLC or you would be protected from the slip and fall on the property.  That’s all true.  BUT!

Once you put your house into an LLC or any other entity (except a living revocable trust) the house isn’t considered your house anymore.

You now have a business property.

Business properties are subject to much higher property taxes than a personal residence. 

You don’t get the income tax benefits from a business property that you get from your personal residence.

With a personal residence, you get to deduct your interest payments on the mortgage. 

You get to sell the house and if you lived in it two of the past five years, a couple gets $500,000 (single $250,000) in appreciation tax free.  That’s lost if you put the house in an LLC.

You can’t use the house as an asset on loan applications if the LLC owns it.  You could use your ownership in the LLC as an asset, but the credit companies will consider that worthless.

Your homeowner’s insurance suddenly becomes a commercial property insurance policy, which is often triple the cost.

It is possible for the IRS to come in and attribute rent from you to the LLC.  After all, you are living rent free in a commercial property.  That would give your LLC phantom income and it would give you a tax problem.

The list goes on and on.

The best choice for 99% of the cases is bag the LLC and just carry a big homeowner insurance policy with an umbrella policy.  That’s your best asset protection for your personal residence. 

Beef up your insurance. It’s usually pretty cheap for the added protection you get. 

Check out my YouTube video on issues surrounding putting your house in an LLC.: https://youtu.be/32f4BwY7iao