When it comes to your real estate investing business, asking questions is part of the job, especially during tax prep season. Think Realty Resident Expert, financial advisor, and attorney Clint Coons offers his advice to questions he hears from clients every day.

A: A home-based business deduction for the business use of your home is typically for sole proprietors and flows onto a schedule C of your 1040. This deduction is highly scrutinized and runs the risk of audit. A better method might be to capture a business deduction with 280A and avoid the recognition of income. The plan works like this. Your corporation will rent your house from you for no more than 14 days per year to have various business meetings e.g., entertaining business associates, required director meetings, etc. The money the corporation pays you for the rental use of your personal residence is tax-free to you and deductible to your corporation. This strategy will only be respected if you actually use your home for business activities such as entertaining clients, holding meetings, etc. You will also need to substantiate any value you ultimately decide on for the daily rental use of your personal resident by keeping a record of comparable properties or square footage. Just think, if you have five business meetings throughout the year and entertaining business associates another four times, you will have nine rental days. If the daily rental value of your personal residence is $1,000 per day, then you will receive $9,000 tax-free from your corporation. If you are in a combined state and federal tax bracket of 35 percent, your savings are just over $3,000.

Q: If I have a home-based

business that is a C-Corporation, do you report this business on your 1040 in order to claim the home business office?

Have a legal, finance, or tax question that might affect your REI? Send questions to Think Realty’s editor at

20 | think realty magazine :: february 2020

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