Renting from yourself.....

1,937 Views | 10 Replies | Last: 3 yr ago by COSciAG
IndividualFreedom
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2:21p, 3/1/23
Help me understand if there is an advantage (essentially reviewing pros and cons) with this scenario, please and thank you.

1. Create a corporation (a specific type might be necessary)

2. Sell your house to the corporation

3. Rent your house from the corporation

My thoughts are potential benefits for tax purposes/liability protection but also how does this play towards your homestead exemption and is this legal?
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Rexter
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2:46p, 3/1/23
I don't remember the specifics of why the accountant said no bueno, but 10 yrs ago I was going to do this with my truck.
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MS08
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2:46p, 3/1/23
AG
Plan to pursue this in 2.5 years so haven't approached with tax attorney yet. But, following this thread because interested in what others have to say.
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txaggieacct85
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2:53p, 3/1/23
AG
Rent is not tax deductible. Rental income is taxable.

And I doubt the county would let you claim a homestead exemption when the property is in a company name.

If you can itemize, your property taxes are deductible. I don't think this would be a legitimate deduction for a company.

and this made my head spin. Usually when that happens its not something to do
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2wealfth Man
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3:44p, 3/1/23
AG
This is not a legit "business" is why the whole thing would be shot down in flames
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txaggieacct85
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In reply to 2wealfth Man • 4:06p, 3/1/23
AG
2wealfth Man said:
This is not a legit "business" is why the whole thing would be shot down in flames
and you're not going to escape the tax man, unless you like jail.
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jwoodmd
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In reply to IndividualFreedom • 4:37p, 3/1/23
IndividualFreedom said:
Help me understand if there is an advantage (essentially reviewing pros and cons) with this scenario, please and thank you.

1. Create a corporation (a specific type might be necessary)

2. Sell your house to the corporation

3. Rent your house from the corporation

My thoughts are potential benefits for tax purposes/liability protection but also how does this play towards your homestead exemption and is this legal?
As someone who owns both personal and rental properties, there's no way this comes out ahead financially for you.

And, without having to get into specifics, if the scenario you listed above were so great, then ask yourself why everyone isn't doing it!
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MS08
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In reply to MS08 • 5:35p, 3/1/23
AG
MS08 said:
Plan to pursue this in 2.5 years so haven't approached with tax attorney yet. But, following this thread because interested in what others have to say.


Did not read entirety of the comments from OP. But, yeah, you cannot have a homestead exemption if the property is owned by a business. I think the only way you can have a homestead exemption when owned by an entity is in a Trust/Estate ownership scenario but not confident on that.

My main interest was around if it is worthwhile to have the business own the residence and then you rent the residence from the business. Why would someone do that, pros-cons, if any?
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agpetz
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5:53a, 3/2/23
If it is an LLC than any income would pass through to individual. If an actual Corporation there are costs/requirements associated with that. Also where is this corporation going to get the money to buy the property? No bank is going to give hundreds of thousands of dollars to a newly formed corporation to buy a house.
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shaynew1
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6:28a, 3/2/23
AG
Sure they will. Just not at as good of an interest rate than a traditional mortgage to an individual.
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COSciAG
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7:09a, 3/2/23
If you're running your business out of your home there are ways to get a home office deduction that is perfectly legal.

Not heard of anyone doing what you are referring to. Even if it were legal, I would be shocked if you were able to keep your homestead exemption.
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