LLC for a rental unit impacts on tax

Thanks for this feedback, how does one convert to corporate rates? It’s “losing” money right now but would like it independent from my wife and is income

We get taxed at the highest bracket and corporate tax seems lower. We can always “reinvest” the corporate earnings into the house

If you have a mortgage on the property you likely will be generating tax losses due to interest, taxes, and insurance costs (assming you are in Texas).

You should get a cost segregation study done on the property and you can accelarate your depreciation and likely will have minimal tax benefit.

Putting real estate in a corporation is a terrible idea as you lose flexibility and if you wanted to move the property to new entity of yours you have a "deemed sale" and will have to pay tax on the difference between your adjusted basis and the fair market value.

Can the initial capital spent on building a rental unit be deducted from taxable income? I am building a smaller home on some property closer to my parents but will probably rent it before moving there in a couple years.

You can lower taxes thru depreciation over time. Expenses for maintenance are deductible yearly but the initial cost is not. There are multiple methods for depreciation, including an accelerated one that recoups money faster than straight line. Taking depreciation lowers cost basis used in calculating profit when you sell the property, so the previous depreciation increases taxable profit amount at time of sale.

I use a tax accountant and am not an expert on taxes.