Raise Your Rent to Save Taxes

If you own a business and lease property to your company, you should consider raising your rent.  Depreciation deductions and other personal write-offs that were incentives for owners to charge low rents have been limited by tax reform.  And because rental activities are subject to passive activity rules your company’s deductions may mean greater tax savings than your personal deductions.  You can use two strategies to offset the higher taxes you might incur from increased rental income.  You can lower your salary so that there is no net increase in your taxable income, or you can make investments that result in passive losses that will offset your higher rental income.  Keep in mind that any unusually high rent that you charge your business can be challenged by the IRS.  It’s best to base the rent on the fair market value of the property.