A California LLC that holds a rental owes an $800 annual tax every year until it is cancelled (R&TC §§ 17941 and 23153), plus an LLC fee once its total California income reaches $250,000 (R&TC § 17942). A single-member LLC is generally disregarded for income tax, so the rental still lands on the owner's return, but the LLC still files Form 568 and pays the tax. Deeding the home into an LLC you own in the same proportions can be excluded from Prop 13 reassessment under R&TC § 62(a)(2), but later ownership changes inside the LLC can trigger it.

The short version

  • $800 annual tax, due by the 15th day of the 4th month of the LLC's taxable year, paid with FTB 3522. It is due even if the LLC does no business, until you cancel it.
  • No first-year break right now. The first-year exemption covered tax years beginning 2021 through 2023 only.
  • LLC fee from $900 to $11,790, based on total California gross income (not profit), estimated and paid with FTB 3536.
  • Income tax: a single-member LLC is generally disregarded federally and in California; the LLC must have the same classification for both.
  • Reassessment: a transfer that changes only how title is held, with the same proportional ownership, is excluded. A later transfer of more than 50% of the interests by the original co-owners, or one person taking majority control, triggers reassessment.
  • BOE-100-B is due within 90 days of a change in control or change in ownership, even when an exclusion applies.

What an LLC costs each year in California tax

The annual tax. Under R&TC § 17941, an LLC doing business in California, or one whose articles were accepted or that registered with the Secretary of State, pays the $800 minimum franchise tax set by § 23153(d)(1), "for each taxable year, or part thereof," until a certificate of cancellation is filed.

The first year. For tax years beginning on or after January 1, 2021 and before January 1, 2024, new LLCs did not owe the $800 for their first year. That exemption has ended, so an LLC formed in 2024, 2025 or 2026 owes the $800 for its first year. A 2026 law (SB 180) sets the first-year tax at $400 for taxable years beginning in 2027 through 2029; confirm with the FTB or a tax professional before forming an LLC, because the FTB's LLC page had not been updated to show it. If you cancel within one year of organizing using the short-form cancellation, the FTB says the LLC is not subject to the $800 for its first tax year.

The LLC fee. In addition to the $800, R&TC § 17942(a) charges a fee based on the LLC's total California income, which means gross income (plus cost of goods sold), not net profit. These amounts have not changed since 2008 and apply to tax years 2025 and 2026:

Total California incomeAnnual LLC fee
Under $250,000No fee
$250,000 to under $500,000$900
$500,000 to under $1,000,000$2,500
$1,000,000 to under $5,000,000$6,000
$5,000,000 or more$11,790

The fee is estimated and paid by the 15th day of the 6th month of the taxable year on FTB 3536. Underpaying the estimate brings a 10% penalty, with a safe harbor if your estimate equals the prior year's fee.

Income tax: a single-member LLC is disregarded

The 2025 Form 568 booklet says an eligible entity with a single owner is disregarded for tax purposes, and its activities are reported on the owner's California return. California follows the federal classification, and "no separate elections are allowed." So a rental in a single-member LLC generally stays on the owner's Schedule E federally, and the passive loss, depreciation and other rules in this series still apply to you as the owner.

The LLC still has its own California filing. Form 568 is used to figure the LLC fee, "including a disregarded entity's fee," and to report the annual tax. It must be filed by every LLC not taxed as a corporation that is doing business in California, is organized in California, or is registered with the Secretary of State.

Out-of-state LLCs. The booklet says a single-member, nonregistered LLC organized outside California, classified as disregarded and not doing business in California, does not file Form 568. Whether owning a California rental is "doing business" in California is a separate question that this guide does not answer. Ask a California tax professional before assuming an out-of-state LLC can skip California filings.

Moving a rental into your own single-member LLC has no federal or California income tax effect, because the LLC is disregarded. On a sale, the single member is treated as the seller for Form 593 withholding. A multi-member LLC must still withhold on nonresident members, and for rent withholding see the 7% rent withholding guide.

Property tax: deeding the home into an LLC

A transfer of real property between a person and an entity is a change in ownership under R&TC § 61(j), and the property is reassessed "unless an exclusion applies," according to the BOE. The exclusion most owners look at is R&TC § 62(a)(2): a transfer that "results solely in a change in the method of holding title" and in which the proportional ownership interests "remain the same after the transfer." For example, an owner who deeds a rental to an LLC that the owner holds 100% of generally keeps the same proportional interest, so the transfer can be excluded.

Two later events can undo that:

EventResultRule
The original co-owners transfer, in one or more transactions, interests totaling more than 50% of the LLCThe property that was excluded is reappraisedR&TC § 64(d)
Any person or entity obtains a majority ownership interest (capital and profits) in the LLCThe real property the LLC owns has a change in ownershipR&TC § 64(c)(1)

Outside those rules, buying or selling LLC interests generally is not treated as a transfer of the LLC's real property (R&TC § 64(a)).

Paperwork and deadlines

  1. Record the deed with a change of ownership report. In San Diego County, a Preliminary Change of Ownership Report is required when a deed is recorded; without one, the Recorder may charge an additional $20 recording fee. Generally, the transferee files a change in ownership statement with the county (R&TC § 480(a)).
  2. File BOE-100-B within 90 days when required. The BOE says the form "must be filed within 90 days of the change in control or change in ownership regardless of whether or not an exclusion from reassessment is applicable." It is also due within 90 days of a written BOE request. The statement lists every county where the entity owns real property.
  3. Know the penalty. Missing the 90 days brings a penalty of 10% of the taxes on the new base year value, or 10% of the current year's taxes if no change in control or ownership occurred (R&TC § 482(b)).
  4. Check your loan. Lender "due-on-sale" clauses are a loan-contract question, not a tax rule. Check your loan documents and talk to your lender before deeding a mortgaged rental to an LLC.

This guide covers taxes only; ask an attorney about any non-tax effects of moving a rental into an LLC.

What to do next

  1. Price the yearly cost. Add the $800 tax, any LLC fee and the cost of a Form 568 to your numbers in the rental cash flow calculator.
  2. Map the ownership. Write down who owns the property now and who would own the LLC, in percentages, so a CPA can check the proportional-interest exclusion.
  3. Ask about future transfers. If you plan to add or remove members later, ask how R&TC § 64 would apply.
  4. Talk to your lender before you sign a deed.
  5. Calendar the 90-day BOE-100-B window for any change in control or ownership.

See also California property tax on rental homes, inheriting a rental property in California and California vs. federal tax rules.

McKee Properties manages rentals from its Coronado office; contact us with questions about your property.

Frequently asked questions

Does my LLC owe the $800 if the rental lost money?

Yes. The $800 is an annual tax, not an income tax on profit. The FTB says it is due every year, even if the LLC is not conducting business, until the LLC is cancelled. The separate LLC fee depends on total California gross income, not profit, and does not apply below $250,000.

Is there still a first-year exemption from the $800?

Not for LLCs formed now. The first-year exemption covered tax years beginning in 2021 through 2023, so an LLC formed in 2024, 2025 or 2026 owes the $800 for its first year. A 2026 law sets a $400 first-year tax for taxable years beginning in 2027 through 2029; confirm with the FTB or a tax professional before relying on it.

Will moving my rental into an LLC trigger a Prop 13 reassessment?

Not necessarily. A transfer that changes only how title is held, with each owner's proportional interest the same afterward, is excluded under R&TC § 62(a)(2). Later, a transfer of more than 50% of the interests by the original co-owners, or one person gaining majority control, can trigger reassessment. A BOE-100-B may be due within 90 days even when an exclusion applies.

Does a single-member LLC change how I report rental income?

Generally not. A single-member LLC is generally disregarded federally and in California, so its activity is reported on the owner's return, but the LLC still files Form 568 and pays the $800 tax and any fee.

Does an LLC protect me from lawsuits?

That is a legal question this tax guide does not answer. Talk to a California attorney about liability, and to your lender about any due-on-sale clause, before you deed a rental to an LLC.

This is general information, not tax or legal advice. Tax rules change and depend on your facts; talk to a CPA or enrolled agent before acting.

Sources

Verified October 19, 2026.

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