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Wife owns property individual, picks up rental income on…

wife owns property individual, picks...
wife owns property individual, picks up rental income on Sched E - husband and wife live together in another home. Wife wants to rent husband the house for his business - both Sched C - does this make sense and what should they know. House is RI
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Answered in 3 minutes by:
9/19/2017
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 17,847
Experience: 15years with H & R Block. Divisional leader, Instructor
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She can rent her property to a business owned by her spouse. The Schedule E she uses would not change on the Schedule E. As long as he does not own any part of the property then there is no problem with him deducting that cost as an expenses.

Were she to rent her portion of their shared home for his business then of course only half the rent would be deductible because when a business leases real property that is owned by the business owner and their spouse, the business owner may claim a rent deduction equal to the ownership percentage of their spouse.

For example, if a business owner and her spouse each own 50% of a building, the business owner may deduct 50% of the rent expense. This deductible 50% represents the spouse’s 50% ownership interest in the property. The business owner cannot deduct the 50% of rent that she essentially pays to herself.

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Customer reply replied 8 months ago
Spouse is 100% owner of property which is different from their residence. However they do file MFJ and the investment property is on their schedule E. Question is with her claiming rent on schedule E and his deductions for rent and maintenance would it be a wash for them on their taxes (possibly a help only with a reduction of self employment tax for him?) Would it be better for wife to own the property in a single member LLC, or the single member LLC would be just more expense for wife?

That Schedule E is her Schedule E not their Schedule E. She is the only one that rents that property she owns out.

If this is her property that he wants t rent then it does not change the Schedule E and the full rent paid is deducted by him on his Schedule C. That rent reduces his self employment tax yes.

Them filing joint does not change her Schedule E as long as he owns none of the property

Please let me know if you need more information.
If not then scroll up to see the STARS to rate so I am credited

Robin D.
Robin D., Senior Tax Advisor 4
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