Q&A: How Do I Get My Rental Losses onto Schedule C?

Question

I’m a CPA in private practice.

Please help me clarify my lifelong question regarding rental real estate and the entity structure that would allow me

(and many of my clients) to use rental losses to offset Schedule C income?

I created an LLC thinking this was all I needed to list my rental activity on Schedule C and thus have the losses offset my self-employment income. But as I research more, trying to confirm this, I’m finding that this will not work and leads to audits.

On my rental, I do not offer any substantial services other than rental.

Please help me.

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Answer

With one exception, rentals go on Schedule E.

To get on Schedule C, your rental must be short term and come with substantial services. Here are two articles that will help you sort this out:

• Know These Tax Rules If Your Average Rental Is Seven Days or Less
• Secrets to Pocketing Cash by Renting a Bedroom in Your Home

The single-member LLC is a disregarded entity for federal income tax purposes. If your LLC owns rentals, the rentals go on your Form 1040, Schedule E as if you had title in your name. For you, the LLC does not exist for purposes of your Form 1040 tax return.

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