Selling a home your LLC owns: does the exclusion survive?
Sometimes. It depends almost entirely on how the LLC is taxed.
Single-member LLC
If you own the LLC alone and it's disregarded for tax purposes, the IRS treats you as owning the home directly. You can still exclude up to $250,000 of gain ($500,000 for married couples filing jointly) if you meet the ownership and use tests: you owned the home and lived in it as your main home for two of the last five years.
Multi-member LLC
If the LLC is taxed as a partnership, the partnership is the seller, and it can't claim an exclusion meant for individuals. A home in a two-member LLC can lose the exclusion entirely. Spouses who own the LLC as community property may be able to treat it as disregarded, which changes the answer.
If you rented it out
Rental years before you moved in can shrink the exclusion. Depreciation taken while it was a rental is taxed when you sell, exclusion or not.
Other things the LLC changes
The mortgage. Transferring a mortgaged home can trigger the due-on-sale clause. Can you move a mortgaged property into your LLC?
Title insurance. Your owner's policy may not follow the property into the LLC without an endorsement.
Homestead protection and property tax breaks. Many are tied to an individual owner and may not apply to an LLC.
The deed. Moving the home back out of the LLC before a sale takes another deed and another recording.
What to do
Before you list, confirm how the LLC is taxed, who the members are, and how long you lived there. If the LLC is a partnership, decide whether to move the home out before selling, and when. Have your tax preparer run the numbers first; when your accountant and your lawyer disagree, sort it out before closing. Document review and revision covers the deed and the LLC documents.
This is general information, not legal advice for your situation. If you want an answer for your business, book a consultation.
