Structuring Investment Properties: Navigating LLC Taxation & Connecticut’s PET Changes
Real estate investors often use Limited Liability Companies (LLCs) to hold investment properties for liability protection, tax efficiency, and estate planning. However, taxation rules—both federal and state—can significantly impact how an LLC operates financially.
Exploring Tax Elections: The Role of Form 8832
LLCs are typically taxed as pass-through entities, meaning profits and losses flow to individual members’ tax returns. However, an LLC can file Form 8832 to elect corporate taxation, allowing the business to:
- Retain earnings within the LLC rather than distributing profits to members immediately.
- Take advantage of corporate tax rates, which may be beneficial for high-income investors.
- Structure ownership more flexibly, making it easier to reinvest in properties.
For real estate investors, this election is not always necessary, but it may offer strategic benefits depending on their financial goals.
Connecticut Taxation vs. Federal Treatment
While Form 8832 changes how an LLC is taxed federally, Connecticut has its own taxation rules that may not align with IRS classifications. One major consideration is Connecticut’s Pass-Through Entity Tax (PET).
Previously, Connecticut required pass-through LLCs to pay a 6.99% tax at the entity level, regardless of how they were taxed federally. However, as of 2024, LLCs can opt out of PET, allowing individual members to handle taxes instead.
How PET Opt-Out Could Benefit Investors
Some real estate investors may choose to opt out of PET due to:
- Lower individual tax rates—LLC owners in lower tax brackets might pay less by handling taxes personally.
- Multi-state investments—PET credits may not be recognized outside Connecticut, making it harder to offset taxes in other jurisdictions.
- Cash flow flexibility—Keeping funds within the LLC rather than paying tax at the entity level could benefit reinvestment strategies.
On the other hand, opting in to PET could be useful for investors looking to simplify tax filings and claim state tax credits.
Finding the Right Approach for Your Investment Strategy
LLC structuring isn’t a one-size-fits-all decision—each investor’s situation is unique. While these tax elections and state regulations offer potential advantages, consulting a tax professional ensures compliance and financial optimization.
📩 Let’s connect and explore how we can build your investment strategy together!
As a realtor specializing in investment properties, I help investors navigate real estate decisions that align with their business structure and long-term goals. Whether you’re looking for new investment opportunities, guidance on real estate transactions, or strategies for managing your portfolio, I’m here to help.
Facebook
X
Pinterest
Copy Link
Commercial Real Estate Hartford CT: Tenant Market Advantages You Need to Know
Hartford Office Space for Lease: Finding Tenant Opportunities in 2025 The Hartford office space sector is currently navigating a dynamic period. While overall vacancy rates in Greater Hartford hover around the 19-24% mark, presenting a landscape ripe with opportunity for savvy tenants, the nuances within different submarkets paint a more detailed picture. For businesses both […]
Analyzing Hartford County Residential Buyer Demand – April 2025
The Pulse of Hartford County Buyers in April 2025 Key Observations for April 2025: Number of Sales: There were 602 single-family home sales in Hartford County. This represents a decrease of 5.8% compared to April 2024. Median Sale Price: The median sale price was $370,000, showing a significant increase of 11.8% from the previous year. […]
Analyzing April 2025 Connecticut Single Family Home Sales
What Happened in Connecticut’s Single Family Home Market This April? Key Observations for April 2025 Number of Sales: There were 1,794 single-family home sales in April 2025. This represents a decrease of 4.2% compared to the previous year (April 2024). Total Sales Volume: The total dollar volume of single-family home sales in April 2025 reached […]
Multifamily Opportunities in Connecticut
Where to Find Your Next Connecticut Multifamily Investment Property Top 10 Most Active Markets For Multi-Family Properties City $149K-$648K $649K-$1,148K >$1,149K Total Bridgeport 19 16 10 45 Hartford 34 2 6 42 New Britain 13 4 2 19 New Haven 65 6 9 80 Norwalk 1 5 8 14 Norwich 19 2 21 Stamford 3 […]
The Shoelace Theory of Motivation: Finding Your “Why” Starts with Your “Where”
How a Clear Goal Transforms Obstacles into Minor Setbacks There I was, on a mission. Not a grand, world-saving mission, mind you, but a slightly less glamorous one: heading out the door to film a promotional video for our upcoming Realtor’s Education Day. Shoes in hand, I went to slip them on, only to be […]
West Hartford Homeowners Face Mill Rate Increase in 2025-2026
West Hartford Property Taxes: What the Mill Rate Hike Means for You West Hartford homeowners will see an increase in their property taxes in the upcoming fiscal year (July 1, 2025 – June 30, 2026) due to the adoption of a higher mill rate. The West Hartford Town Council approved a budget that sets the […]
Is Hartford County’s Housing Market Really That Competitive? Let’s Look at the Data
The Hartford County Housing Hustle: How Fierce is the Fight for Homes? 1st Quarter Trends and the Bigger Picture Using 2022-the last year of low interest rates and a more balanced market-as our benchmark, let’s dive into what Hartford County housing data reveals about the 1st quarter of 2025 Number of New Listings 2022 2023 […]
© 2025 MoxiWorks
© CENTURY 21 2023 - 2024. All rights reserved. CENTURY 21®, C21® and the CENTURY 21 Logo are registered service marks owned by Century 21 Real Estate LLC. Franchisee Legal Entity Name (not the dba) fully supports the principles of the Fair Housing Act and the Equal Opportunity Act. Each franchise is independently owned and operated. Any services or products provided by independently owned and operated franchisees are not provided by, affiliated with, or related to Century 21 Real Estate LLC nor any of its affiliated companies.
