Discussion:Sole Propietorships Charging Rent to Themselves
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Discussion Forum Index --> Advanced Tax Questions --> Sole Propietorships Charging Rent to Themselves
Discussion Forum Index --> Tax Questions --> Sole Propietorships Charging Rent to Themselves
| 29 August 2008 | |
| I have a client that owns a building and rents sections of that building to a couple other entities and the majority of it to himself. My question is this: is he allowed to charge himself rent and report that expense on sch. c as a deduction and as income on sch. e? He makes enough that the only reason for doing this would be to save a little on the 2.6% medicare tax (his net income on sch. c is above the threshold for payment of social security taxes so he is paying in the maximum that he can for social secutity tax. He is a solp prop.
If anyone has any sugjestions that would be great (also where I can find them in the code, regs, or publications. Thanks, -TaxMan | |
| 29 August 2008 | |
| I would also say no. Take a look at Publication 334
"Rent Expense Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as a business expense only if the rent is for property you use in your business. If you have or will receive equity in or title to the property, you cannot deduct the rent." | |
| August 29, 2008 | |
| Nope. He gets depreciation, mortgage interest, property taxes instead. | |
Death&Taxes (talk|edits) said: | 29 August 2008 |
| There are at least two discussions on 'self rental' thru the yellow box. | |
RoyDaleOne (talk|edits) said: | 30 August 2008 |
| Sec. 162 (a)(3) | |
ReadytoRetire (talk|edits) said: | 31 August 2008 |
| I'm new to the forum and not familiar with the "yellow box".
A sole prop in a community property state can pay rent to his spouse for his/her's community interest in the property. | |
RoyDaleOne (talk|edits) said: | 31 August 2008 |
| And what about his/her's community interest in the sole prop.? | |
| 31 August 2008 | |
| I have a very similar situation.
A physician client has an office in a medical arts building that he also personally owns. You cannot take a deduction paying rent to yourself to avoid the SE tax. I raised this particular issue a couple of years ago, if not on this board, a couple of other professional boards. The response I got, and decided to go by is - determine the actual ratio of that office space to the total building. Once you have come up to 100% numbers on Schedule E, transfer out that ratio of expenses (to reduce total expenses) and transfer that amount to Schedule C | |
| 1 September 2008 | |
| Agree with Uncles handling of this. Set up a spread sheet and allocate.
Ready to retire (don't i wish!), the "yellow box is in the upper left portion of the window and is where you can enter search perameters. When you want to start a discussion it is best to begin by looking at what has already been discussed and either add to a previous discussion or begin a new one if you need to. | |
