Renting Home Office Space To An S Corporation
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On your corporation s side the business purpose of this rental expense is clear.
Renting home office space to an s corporation. The s corp can deduct the expenses but you will not call them home office expenses. If you have a home office and recently transitioned your business to an s corp you ll want to understand the steps you need to take in order to continue to take the home office deduction available to you. This is the old school way of doing things. Irc section 280a c 6 disallows tax deductions for the home office on rentals by employees to their employers.
If you rent a portion of your home to the s corporation you must do it so at fair market value. Every year businesses deduct these expenses with no problems. The third option being reimbursed under an accountable plan provides the greatest tax. By jason watson cpa.
Whether you operate as an s corporation or a c corporation you get minor zero or negative benefit when you rent an office in the home to your corporation. However the share holder can rent the space to the s corp and report it on schedule e and the s corp can deduct the furnishings etc. Posted november 23 2018. Should i have my llc or s corp pay me rent is another daily question.
Accountable plan for s corporation deductions and reimbursements. Your s corporation simply gets a deduction for the rent paid to you but you have to recognize this rent as rental income on schedule e. 280a c 6 disallows any deduction attributable to the rental of the taxpayer s residence to his or her employer during any period in which the individual uses the residence in performing services as an employee of the employer. Keep in mind though that this is an area of increased irs scrutiny so make sure you formalize everything in a lease and that you have established a.
Renting home office and storage space to a corporation. You must complete an accountable plan. The s corporation can pay you rent for the home office. Here are the steps you need to take to deduct your home office as an s corp.
Either you rent a portion of your home to the s corporation as office or storage space or the s corporation reimburses you for the home office use under an accountable plan. Rent office to the corporation. This is because of section sec 274 that prohibits a shareholder employee from deducting home office expenses. The s corporation can pay you for the costs of a home office under an accountable plan for employee business expense reimbursement.
Renting space for business meetings and or the annual holiday party is unarguably an ordinary and necessary business expense. Whether you operate as an s corporation or a c corporation you get minor zero or negative benefit when you rent an office in the home to your corporation. Have your s corporation pay you rent. 1 thus owner employees do not achieve home office deductions on the rental.
When you own 2 or more of an s corp the rules dramatically change when it comes to car ownership paying rent for shareholder assets and home office deductions.
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