building home office addition

I am building an addition to our house. It will be used exclusively as my wife's S-Corp office space.

Total construction cost will be $30,000.

Can I take e.g. 60 month construction loan at apr. $500/month and have her Corp. pay me $500/month rent fee ?

She would have business expense deduction and I would have ( hopefully) zero additional tax liability because my additional income would equal my expense .

Would it make a difference if I rent out this space as "myself LLC" ?

If the option described above is not going to work, what is my best other option ?

Thank you

John

Reply to
arek
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"arek" wrote

It may or may not equal out. You don't get to deduct your monthly construction loan payment in full.

What you'll have, is rental income, off-set by the loan interest, some percentage of taxes, insurance, utilities, and depreciation on the $30K addition over 30 years.

You can't create a loss to yourself.

Self-rentals like this have run up a number of court cases in tax or district courts.

Consult with a local CPA or attorney about the potential problems that loom ahead for you.

Reply to
Paul Thomas, CPA

Paul,

Thank you very much for the feedback.

In other words it looks like the scenario I described would be no different than my wife just doing the typical home office deduction with 30 years deprecation for renovation cost ?

- John

Reply to
arek

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