MARK KOHLERMain Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, Main Street Professionals, LLC · Owner at Main Street Professionals, LLC

STOP Putting Rental Property in an S-Corp! 🛑

4 Aug 2026 · 1 min

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In this concise advisory segment, the speaker warns against using an S corporation for rental real estate. He explains that rental income and capital gains from the sale of a property are not subject to self‑employment tax, which is the primary tax‑saving reason to employ an S‑corp structure. Because the S‑corp strategy targets self‑employment tax, it offers no benefit for rental or capital‑gain income. Instead, the speaker recommends simpler, more appropriate entities such as a single‑member LLC (treated as a sole proprietorship on Schedule E or D) or a partnership, noting that these structures avoid unnecessary complexity while still providing the needed legal and tax framework.

Chapters

Here's a scenario where I don't want to do the S corporation. You've got a rental property. If you've got rental real estate, do not be setting up an S corporation. Okay. Rental income. Like when I own rental real estate, what am I making money on? Rents and capital gain when I sell the property. Neither of those types of incomes are subject to self-employment tax. They're entirely exempt from self-employment tax. S corp strategy is a strategy and additional work to save on self-employment tax. I don't have it on rental income or capital gain income. The LLC is cleaner. There's other tax reasons for it. I'm simplifying it there, but for rental real estate, or your investment assets that are producing rental income, capital gain income, stuff like that, no reason to use an S corporation there. Let's just go LLC, whether that's a single-member LLC, sole prop, flowing down your Schedule E, I guess, or D, or whether that is a partnership, which is another entity we should talk about.