How to Write Off Taxes on Small Business Rental Property
If you own a small business, you may write off the cost you pay for your office rental against your income. The amount you pay for rent is considered an expense of doing business. It can in most circumstances be subtracted from your gross income, reducing the amount on which you are taxed. This is especially beneficial for small business income, which is subject to the added self-employment tax of 15 percent.
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Instructions
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Determine whether the rent you paid for office space is eligible to be taken as an expense. The amount must be reasonable, and if you are renting from a relative the amount must be the same as you would pay to a stranger. If you have equity in the property or will receive it in the future, then you may not deduct the rent. If you rent your home, but use a portion of it exclusively and regularly for business purposes, you may make a home office deduction.
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Calculate the total amount that you have spent on office rent for the taxable year by adding together payments actually made to the lessee. The rent paid may be deducted in the year in which it is paid, except when it is paid in advance, and then it can only be deducted in the year for which it applies. If you had to pay to cancel a lease, you may add that amount as well. You may also add the amount spent to get a lease, by dividing the amount you spend by the number of years on the lease. If you are taking a home office deduction, figure out the percentage of your home used for your home office and count that percentage of your rent as deductible.
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Enter the deductible amount on the appropriate form. For rent of business property or an office, enter the amount on Line 20b on your Schedule C: Profit or Loss From Business. If you are taking the home office deduction, enter the deduction on Line 30 of Form 8829, Expenses for Business Use of Your Home. In either case, the amount spent on rent will offset your net profit and reduce the taxable amount.
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Tips & Warnings
This overview provides general information, and is in no way meant as a substitute for advice from a licensed tax attorney or qualified Certified Public Accountant.
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