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Rent your home to your business tax-free

Updated: Jan 20, 2019

The vast majority of our business clients are S Corporations which can have meetings wherever they like - including your home. Generally speaking, you can rent your home (or a room) for 14 days (or fewer) each year tax-free.

So, if you are a shareholder of an S Corporation (or other legal entity), you can conduct meetings at your house, charge your company a fair and reasonable rate for the rental of your home, your company gets to deduct the expense and you won't have to pay income tax on the amount received personally.

Does that sound too good to be true? Well, some conditions do apply.

One, you can't provide "entertainment" at your meeting. That would qualify your home as an entertainment facility and compromise this strategy.

Here's an example of how this can work. Jessica owns Jessica's Real Estate, Inc. and operates as an S Corporation. She has a team of 15 agents. Each year Jessica holds ten monthly all-day training sessions for her agents. She has researched competitive bids for these meetings and determined $1,500 is a fair and reasonable expense in her area. Jessica can invoice her company a total of $15,000 for the year and that income is tax-free to her since she is renting her home for 14 days or less.

Jessica's corporation can deduct the $15,000 as well. In effect Jessica spends company money she would have spent anyway... except now she and not a third-party venue receives the income.

And you can too--as long as you meet IRS guidelines.

First you need to be able to document that the rent you charge is fair and reasonable for your area. Next is the "entertainment issue," which you can be address by making sure your event is a training session.

Document the business activities that took place, maintain a sign-in sheet, and keep copies of your training materials.

Finally, your corporation should issue a 1099 for the total rents paid to you during the year. If you have your taxes prepared, clearly communicate your intentions to your tax preparer and they should know what adjustments to make on your tax return so that you don't pay tax on the income reported on the 1099.

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