Can I charge my LLC rent vs home office deduction?

Question

I’m relatively new to the real estate investing world and continue to focus a lot of energy on education. I am currently focused on tax strategies for our LLC (partnership with spouse).

Can we sign a lease agreement with our LLC to provide/pay rent for use of our personal home/property, to include a portion of utilities, HOA, and insurance? Or invoice the LLC for use? We are looking to do this versus a home office deduction, which we probably wouldn’t qualify for anyway (would fail the exclusive clause).

I’m sure this question has been covered before in the forums, but I can’t seem to locate a specific thread on this topic. Any advice would be greatly appreciated.

Thanks,

-Jonathan

Michael Plaks · Answer

@Jonathan Burkett

You asked for "any input", and I hope it includes an unvarnished kind.

Drop this "building our team" thing. It's a code word for tire kickers who do nothing but loitering around REI clubs (now online, but same concept), talking shop to everybody while doing absolutely nothing to actually close deals and make money.

Also drop the "multiple markets" thing. It's the next stage, after your cut your teeth in your local area.

Generally, less talk and getting ready (which are both fun but do not pay bills) and more rolling up your sleeves and doing the work.

Russell Brazil · Answer

The 14 day trick to rent your home blows up in everyone's faces that use it. Go look at the tax court case on it.

Sarah Villamizar · Answer

Just met with our tax advisor and he said it does work to increase your deductions for your LLC if your LLC rents out your home office. The key is to only do this for 14 days or less… then you don’t have to report that money as income you made but can still count it as an LLC expense. Not sure if this is common or not… any thoughts?

Michael Plaks · Answer

Nope. It was that way many years ago. Not anymore. No reason to fear an audit because of home office.

And this silly self-rent trick does not work.

Sean Morrison · Answer

The other problem with putting your personal home in an LLC is that you will probably lose your homestead exemption, and end up paying more in property taxes.

Jonathan Burkett · Answer

Thank you for the information. I can see/understand the zero/sum game.

And copy on the focus for building during this time period. We are working to continue building our team in multiple markets (KC and Alabama); any input for that is greatly welcomed. :)

Thanx!

Michael Plaks · Answer

@Jonathan Burkett

I would not focus on tax strategies now. Focus on figuring out how to make deals in today's environment.

Your idea does not work anyway.

Can I charge my LLC rent vs home office deduction?

Can I charge my LLC rent vs home office deduction?

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