illfittingshirt said:
The LLC in question will have the property transferred to it at time of sale. I plan to put 50k in cash down at time of closing. I can then subtract the basis (50k in cash + loan amount) from my adjusted gross income from my day job (as a loss), assuming that the income from the last few months of the year is comparatively negligible and I don't sell any properties for this year that can be added to the profit side. Even if no cash were put down, the loan amount can qualify as the basis.
I recommend reading 'The ABC's of Real Estate Investing' as well as visiting the Rich Dad forums. Real estate is their specialty.
As for the LLC, you get no special tax treatment for LLC vs. personal income. The primary purpose of an LLC at this point would be to protect your personal assets from any lawsuits relating to the properties.
Regarding your tax deductions, you need to research this much more. I've spent a lot of time in the last few weeks researching this exact topic.
If your MAGI (roughly speaking it is all your income from all non-passive sources without any deductions) is under $100k, you can deduct up to $25,000 of losses from your personal income taxes.
If your MAGI is over $150k then you cannot deduct any of your losses from personal income taxes -- you may only deduct expenses up to the amount of income that you had.
If your MAGI is between $100k and $150k, then you can deduct up to 1/2 of the difference between $150k and your MAGI. For example, suppose you make $120k total (not including rental income because that is passive and does not count towards MAGI) Then the difference between that and $150k is $30k. Half of that is $15k, and this is the max amount of losses you could deduct from your personal income taxes.
Note that if you are married, then MAGI applies to both of you and the limits don't change. This is one area where the marriage penalty is still very prevalent.
Also, you can carry-forward your losses that are not deductible until you have a profit. For example, suppose you had $10,000 of losses that you could not deduct. Then the next year you had another $10,000 you could not deduct. Now you have $20,000 of carry-forward losses. Then in year 3 you make $30,000 net profit. You could deduct the $20,000 of carry-forward losses and therefore only pay tax on $10,000 of profit in Year 3.