Tax Savings Tips: March 2023
Holding Real Property in a Corporation: Good or Bad Idea? As the real estate market has cooled off in many parts of the country, investing in property may seem wise in the long run. But taxes can be a significant concern. Owning real estate in a C corporation may not be wise when considering taxes because it puts you at risk of being double-taxed. This means that if you sell the property and make a profit, the gain may be subject to taxation twice—once at the corporate level and again at the shareholder level when the corporation pays out profits to shareholders as dividends. The Tax Cuts and Jobs Act reduced the double taxation threat, but with our current federal debt, you face the risk that lawmakers will hike the corporate tax rates and possibly also tax dividends at higher ordinary income rates. To avoid this threat, I usually recommend using a single-member LLC or revocable trust to hold real property. A disregarded single-member LLC delivers super-simple tax trea