Self-Rental Trap… or Self-Rental Opportunity?

[William Thompson]

Let’s say you own an auto repair business taxed as an S-Corporation.

Separately, you own the garage building in an LLC.

So you decide to have the S-Corp rent the garage from your LLC.

Simple enough, right?

Maybe.

Here’s where investor mindset comes in:

Is this a self-rental trap…
or a self-rental opportunity?

Under the right circumstances, self-rental rules can work in your favor.
Under the wrong setup, they can create tax consequences you didn’t expect.

Most business owners don’t realize that how you structure rent between entities can affect:

• How income is classified
• Whether losses are passive or non-passive
• And how the IRS views the activity altogether

If you don’t understand the rules, this could quietly cost you thousands.

But if structured properly, it can be a strategic move.

Investor mindset isn’t just about buying assets.
It’s about understanding how those assets interact.

For those who own both an operating business and the real estate it runs out of — have you ever looked closely at how the self-rental rules apply to you?