The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Livethedream on February 24, 2018, 09:32:38 AM
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We have several rental properties we are looking st putting into an LLC because of the new tax law tha will deduct 20% of the income.
Our questions are:
1. Can we make our children X% owners, if so do they have to work or can they just be partial owners?
2. If they can own, when they receive money from LLC will it be considered earned income for the purposes of a Roth IRA?
3. If the income doesn’t qualify, would a bonus qualify as earned income?
Thanks!
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Rental income is never earned income unless you're a real estate professional.
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Are your kids over 18? If not then you will need to find out whether minors are allowed to directly hold shares of an LLC or if they will need to use some sort of a custodianship to hold the shares for the minors. Otherwise there is no reason why they cannot be partial owners and receive a portion of the revenues without having to work.
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I did some research and minors are legally able to have ownership in an LLC. Think I am at a dead in for now though since the LLC would have only passive and not earned income for the purpose of funding a ROTH Ira.
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This seems like a great question for a CPA or tax attorney vs the internet of strangers.
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I too own several rental properties and I pay my kids (both under 18) for helping me out with my rentals. This amount is fully deductible by me and they don't need to pay taxes on the first 6k. This would be earned income so they can contribute to a ROTH. You accountant should know about this - if he doesn't look for a new one! :)