[pattygracer]

I rent a house and own my own business. Can I rent part of my rental house back to my business, is it a sublease? Or is it better to just take a deduction on my taxes for one of the rooms used for the office, can you do that for a rental property?
Thanks!

[AtlantaTaxExpert]

You CANNOT rent a room to your business unless it is a corporation, and even then it is not a real good idea.

You can claim a home office even if you rent the house, just as long as it is a separate rooom.

[The Junoo]

When it comes to the home office deduction, the tax laws and IRS rules do not distinguish between homes owned or rented by a business operator. A home business operator can claim the home office deduction whether the business owner rents or owns the home where the office is located. Renting a home can actually make it easier to calculate the home office deduction. When you own a home, you have to first compute the portion of your home that you use, and then you have to depreciate that portion for tax purposes. When you rent a home, though, you don't have a capital asset so you don't have to factor in depreciation. You merely have to calculate the percentage of your home dedicated to the home office and then multiply that percentage by your rent. For example, you rent a 2,000-square-foot home for $2,000 per month. You dedicate a 500-square-foot bedroom as your business office and you meet the requirements above. The 500-square-feet office is 25 percent of your home, which means you may deduct 25 percent of your rent. Over a one-year period, this equals $6,000 ($2,000 x .25 x 12).


NOTE: A home office deduction in a rental home is subject to all the same rules as a home office deduction in an owned home. The home office must be dedicated to your business and used exclusively by your business. Additionally, you must regularly use the office for business purposes. Finally, the office must be either your primary place of business or a place where you regularly meet with clients or customers.

[joypulv]

The IRS likes to flag tax returns that take the home office deduction. Be sure that you use that room exclusively for business, that it is a real 'room', and from what I hear, they want a separate phone number for the business too. Plus, make sure your entire return is in good order.

[AtlantaTaxExpert]

A separate Phone is not a bad idea, but it is not required.

The separate room IS required, though.