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I rent a house - there is a guest house on the property that

Customer Question
Hello i rent a house -...
Hello
i rent a house - there is a guest house on the property that I use for an office,
the business i own pays $ 1,500 rent to me and I pay the landlord the total rent
of $ 4,000. Do I declare the $ 1,500 as income ???
Submitted: 2 years ago.Category: Tax
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11/19/2015
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,888
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello

How all this is accounted for depends on the business structure. What is your business structure, sole proprietor, S corp, C corp?

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Customer reply replied 2 years ago
C Corp that I own paying myself $ 1500 toward the total rent
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

Thanks

Yes the C corp would deduct that as an expense and you then report as income on Schedule E.

If you were being reimbursed under an accountable plan, provides the greatest tax savings. It is an excellent way to get money out of your closely-held corporation tax-free. The corporation can deduct the amount of the reimbursement and you do not have to report the payment as income.

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Customer reply replied 2 years ago
not sure what Accountable Plan is? so I do not have to claim the $ 1,500 as personal income on my 1040?
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

Yes for 2015 you do.

You may wish to look at establishing an accountable plan for your C corp in the future.

You as employee of the C corp would be reimbursed for home use. The C corp could still deduct but you would not have to report yourself for personal.

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Customer reply replied 2 years ago
OK, so the Corp can deduct the $ 1,500 and I do not report as income, also i have additional questions, can we set up a live phone call later
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

You should create a monthly "Employee Expense Report" form for your corporation.

Include a Home Office section in the report. Calculate the "business use percentage" of your home office. List each item of expense paid during the month, such as insurance, oil heat, gas and electric, water and sewer, alarm or security service, garbage disposal, general repairs and maintenance, and rent. Multiply the total of these expenses by the business use percentage to determine the amount to be reimbursed.

Total up all the business expenses listed on the form, including the home office amount, and write a check from the corporation to yourself for this amount.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

If my answer addressed your question please rate below or above (let me know if you have difficulty as I believe the system changed), if you need more information reply below.

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Customer reply replied 2 years ago
just to be clear the check written from the corp to me, how do i show that on my return?
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

You would not if you have an accountable plan. It is a reimbursement to you under the accountable plan and not taxable. Without the plan you use Schedule E as rental income to you.

FREE EXTRA INFORMATION FOR YOU

Below is a link for you to have as a step by step guide

http://www.tax.gov/TaxabilityCertainFringeBenefits/pdf/Accountable_v_Nonaccountable_Plans_Methods_of_Reimbursing_Employees_for_Expense.pdf

I really enjoyed working with you – please feel free to request me again when you come back to ask another question.
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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

Did you need more information?

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

If my answer addressed your question please rate below or above (let me know if you have difficulty as I believe the system changed), if you need more information reply below.

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