Four Reasons You Don’t Want to Put Real Estate Inside an S Corporation

Rental property owners sometimes consider using S corporations to hold their investments. And at first look, this idea sort of seems promising. S corporations are very popular with non-real-estate small businesses. And one hears all the time about all the tax savings that the S corporation delivers.Sadly, while many people do hold real estate through an S corporation, an S corporation doesn’t make sense for a handful of practical reasons:No Benefit to Using S CorporationThe first reason you shouldn’t put real estate inside an S corporation? Simple. S corporations don’t deliver special or extra tax benefits to real estate investors.Income and deductions within an S corporation retain their character as they pass through the S corporation and flow onto the S corporation owner’s tax return. Accordingly, an S corporation doesn’t let you avoid the passive loss limitation rules (which often trip up real estate investors). And the S corporation doesn’t increase the number of tax deductions you get.Note: If you’re concerned about limiting your legal liability, you don’t need to use an S corporation. You can use a limited liability company.Forces an Extra, More Complicated tax returnOne thing putting real estate inside an S corporation does do? A real estate… Read full this story

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