Can My Business Deduct Rent Paid to My Investment Property?

2 Replies

My wife and I are purchasing a condo with garage storage in an NJ shore town. The main purpose will be for vacation rentals. I also have a start-up business that will require storage space for business inventory in the same town. Can my business pay us fair market value rent for the storage, and thus let me deduct the rent from any business income? Of course, we would include the rent that my business pays as rental income. 

Originally posted by @Joe Kamenar :

My wife and I are purchasing a condo with garage storage in an NJ shore town. The main purpose will be for vacation rentals. I also have a start-up business that will require storage space for business inventory in the same town. Can my business pay us fair market value rent for the storage, and thus let me deduct the rent from any business income? Of course, we would include the rent that my business pays as rental income. 

Absolutely, that is one of the best ways to convert your income subject to self-employment tax to non-self-employment income. You do however have to navigate the self-rental rules. 

 

Hi Ashish,

Thank you for that. I have read up on self-rental rules, and yes, they can be confusing. Here is my potential scenario. My business would rent the available storage space in the condo for $500 per month. So, at the end of a 12-month period, my business would take a $6,000 deduction for business rent. Assuming that I have net business losses for a year or two, I would be able to offset my job income with these business losses.  Our condo would recognize that $6,000 as rental income, which would be included with other rental income from vacationers. Does this scenario create any issues?