One highly effective strategy is renting personal property, such as a home office or garage, to your business. If your S-Corporation or LLC uses part of your personal property for business purposes, you may be able to rent this space to your business. The rental payments you receive are deductible as a business expense, which reduces your taxable income for the business. However, it’s crucial to ensure that the rent charged is aligned with fair market value to avoid IRS penalties. The transaction must be properly documented and follow IRS guidelines to ensure that it is considered legitimate.
This strategy not only helps reduce the business’s taxable income but also provides a tax-efficient way for you to generate additional personal income. However, the key is ensuring that the rental arrangement is structured correctly to avoid any IRS scrutiny. At Toran, we guide business owners on how to implement this strategy effectively, ensuring compliance and maximizing tax savings.