【理财】節稅小幫手 207 - CONTRIBUTE YOUR HOME TO A LLC? | 佳財會計師事務所

A Limited Liability Company, often referred to as an LLC, is a great tool to protect both your business assets and your primary home. If you plan to create an LLC to hold the title of your primary home, your best choice will generally be a single-member LLC (SMLLC). In this case, not only is your property protected but you also retain the tax benefits that came with the primary home. If the LLC is not taxed this way, there are often bad tax consequences, and I generally do not recommend it from a tax standpoint. In addition, there are few things to consider before forming an SMLLC for your home.

First, watch out for transfer taxes. Some states, with California being one of the exceptions, impose transfer taxes when you move the title to an SMLLC. Be careful; these taxes can be hefty.

Second, verify that your mortgage banker allows for the transfer; run it by them before making the transfer. Also, watch out for the due-on-sale clause in your mortgage agreement. This clause allows the bank to call your loan upon a title change.

Finally, find out what your state’s homestead exemption amount is. For the unaware, the State homestead exemption rule is to protect a homeowner from lawsuits that may force a sale to satisfy the debt owed. California has an exemption amount ranging from $100,000 to $175,000 depending on your personal details. Other states like Florida or Texas have a higher amount. If your equity in your home is within the exemption amount, having an SMLLC may be unnecessary.

Next week, we will be discussing home office taxation. Hopefully, many of you will find it useful, especially with our current situation. Good luck and stay healthy!