[{"@context":"http:\/\/schema.org","@type":"Article","dateModified":"2022-07-23","description":"This article is about how S Corporation pay rent.","articleBody":"It\u2019s very common for sole proprietors to form an entity and elect S corporation status on it to mitigate the self-employment tax burden.  A natural follow-up question that many ask is, \u201cWell, now that I am an S corporation shareholder-employee, can I still take the home office deduction? I used to report it directly on Schedule C, but now what? Does my S corporation just pay me rent for the space?\u201d  Well, you have three options here to take some kind of deduction with respect to the S corporation\u2019s use of your home.  But you really only have one option, because two of the three options are really crappy and semi-useless.  Book a Free Call: I\u2019m a CPA with \u201cBig 4\u201d tax experience. If you\u2019re interested in working with my firm on your S corporation tax matters, email me at taxes@loganallec.com.  Option 1 (Fail): Have Your S Corporation Pay You Rent. This is the \u201cold school\u201d way of doing things.  Your S corporation simply gets a deduction for the rent paid to you, but you have to recognize this rent as rental income on Schedule E.  Keep in mind, though, that this is an area of increased IRS scrutiny, so make sure you formalize everything in a lease and that you have established a fair market rent.  And here\u2019s the catch. IRC \u00a7280A(c)(6) disallows home office deductions on rentals by employees to their employers, so you don\u2019t even get those cool home office-y deductions like homeowner\u2019s or renter\u2019s insurance, HOA dues, repairs, utilities, etc.  You can still report a portion of your mortgage interest and property taxes on Schedule E.  The only potential benefits of doing this are reducing your S corporation\u2019s income (which may let you take a lower FICA-subject salary), the ability to report a portion of your mortgage interest and property taxes on Schedule E if you take the standard deduction, and if you itemize taking a portion of your mortgage interest and property taxes as above-the-line-deductions.  But again, you don\u2019t get to take any home office deductions, so this is basically a fail. Option 2 (Fail): Claim the Home Office Deduction as an Employee Business Expense. Under this option, you claim the home office deduction as an employee business expense.  Now, as you know, the employee business expense deduction is a miscellaneous itemized deduction on Schedule A.  But these deductions are subject to 2% of your adjusted gross income, meaning that you won\u2019t even get the full deduction.  Fail much?  Option 2 was eliminated by the Tax Cuts and Jobs Act of 2017. Option 3: Set Up an Accountable Plan. We\u2019ve shown that neither the S corporation-renting-to-employee-shareholder method nor taking the home office as an employee business expense make sense.  So what does make sense?  The solution is to set up an accountable plan under Treas. Reg. \u00a71.62-2(d)(1) through which your S corporation can reimburse you for all of your home office expenses.  You submit a report to your S corp that contains the home office expenses you incurred as an employee of your S corporation (including depreciation deductions).  The S corporation gets the deduction, and you report no income on your individual return because this is an employee reimbursement for expenses incurred in the performance of your duties for the convenience of your employer, i.e., your S corporation.","name":"S Corporation Pay Rent Home Office Article","datePublished":"2018-12-15","image":"https:\/\/moneydoneright.com\/wp-content\/uploads\/2018\/02\/S-Corporation-Home-Office-Deduction.png","headline":"Can My S Corp Pay Me Rent? How Do I Take the Home Office Deduction in an S Corp?","mainEntityOfPage":"https:\/\/moneydoneright.com\/taxes\/business-taxes\/s-corporation-pay-rent-home-office\/","publisher":{"@type":"Organization","logo":{"@type":"ImageObject","url":"https:\/\/moneydoneright.com\/wp-content\/uploads\/Money-Done-Right-Personal-Finance-and-Investing-Blog.png","name":"Money Done Right Logo","height":"488","width":"60","@id":"https:\/\/moneydoneright.com\/#ImageObject"},"address":{"@type":"PostalAddress","name":"Money Done Right Address","addressCountry":"United States","addressLocality":"Valencia","addressRegion":"California","postalCode":"91354","streetAddress":"23890 Copper Hill Dr Ste 139","@id":"https:\/\/moneydoneright.com\/#PostalAddress"},"url":"https:\/\/moneydoneright.com\/","publishingPrinciples":"https:\/\/moneydoneright.com\/methodology\/","additionalType":"Blog","name":"Money Done Right","email":"support@moneydoneright.com","sameAs":["https:\/\/twitter.com\/moneydoneright","https:\/\/www.facebook.com\/moneydoneright\/","https:\/\/www.instagram.com\/moneydoneright\/","https:\/\/www.linkedin.com\/company\/money-done-right\/","https:\/\/www.pinterest.com\/moneydoneright\/","https:\/\/www.youtube.com\/c\/MoneyDoneRight"],"foundingLocation":"https:\/\/en.wikipedia.org\/wiki\/Santa_Clarita,_California","legalName":"Allec Media LLC","naics":"519130","parentOrganization":"https:\/\/moneydoneright.com\/#ParentOrganization","founder":{"@type":"Person","hasCredential":["https:\/\/cslainstitute.org\/","https:\/\/en.wikipedia.org\/wiki\/Certified_Public_Accountant"],"url":"https:\/\/moneydoneright.com\/author\/logan-allec\/","spouse":"https:\/\/moneydoneright.com\/author\/caroline-allec\/","image":"https:\/\/moneydoneright.com\/wp-content\/uploads\/2020\/01\/Logan-Allec-Money-Done-Right.jpg","name":"Logan Allec","description":"Logan Allec is a practicing Certified Public Accountant, Certified Student Loan Professional, and the founder of personal finance blog Money Done Right.  He provides a second level of review for the site\u2019s more technical articles, particularly those pertaining to taxation, credit, and student loans. He also educates thousands of people every week on The Money Done Right Show.","email":"logan.allec@moneydoneright.com","sameAs":["https:\/\/loganallec.com\/","https:\/\/twitter.com\/loganallec","https:\/\/www.benzinga.com\/author\/logan-allec","https:\/\/www.facebook.com\/logan.allec","https:\/\/www.fareverse.com\/writer\/logan-allec-cpa-freelance-writer\/","https:\/\/www.instagram.com\/loganallec\/","https:\/\/www.legalzoom.com\/author\/logan-allec","https:\/\/www.rent.com\/blog\/author\/logan-allec\/","https:\/\/www.thebalance.com\/logan-allec-5192331","https:\/\/www.youtube.com\/channel\/UC3Jg7eUCBPsjX13X7kTW1hQ"],"familyName":"Allec","givenName":"Logan","birthDate":"1988-08-04","birthPlace":"https:\/\/en.wikipedia.org\/wiki\/Anaheim,_California","alumniOf":["http:\/\/www.ucla.edu\/","https:\/\/en.wikipedia.org\/wiki\/Ernst_%26_Young","https:\/\/www.usc.edu\/"],"gender":"Male","jobTitle":"Founder","nationality":"https:\/\/en.wikipedia.org\/wiki\/Americans","worksFor":{"@id":"https:\/\/moneydoneright.com\/#Organization"},"@id":"https:\/\/moneydoneright.com\/author\/logan-allec\/"},"@id":"https:\/\/moneydoneright.com\/#Organization"},"author":{"@id":"https:\/\/moneydoneright.com\/author\/logan-allec\/"},"@id":"https:\/\/moneydoneright.com\/taxes\/business-taxes\/s-corporation-pay-rent-home-office\/#Article"},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"Taxes","item":"https:\/\/moneydoneright.com\/taxes\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"Business Taxes","item":"https:\/\/moneydoneright.com\/taxes\/\/business-taxes\/#breadcrumbitem"},{"@type":"ListItem","position":3,"name":"Can My S Corp Pay Me Rent? How Do I Take the Home Office Deduction in an S Corp?","item":"https:\/\/moneydoneright.com\/taxes\/business-taxes\/s-corporation-pay-rent-home-office\/#breadcrumbitem"}]}]