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Income Tax Blog > Income Tax Tips > Rental Expenses
Rental Expenses - Tax Deduction Tips
Rents - As a business decision, sometimes it might make more sense to rent than to buy property, transportation, or equipment used for the daily activity of your business. Renting or leasing may require a smaller disbursement of cash, while providing a more satisfactory benefit. If you pay to use property for business that you do not own, the payments are rent. They may also be called lease payment.
Rent with an option to buy – If you have a conditional sale contract, payments made under this agreement are nondeductible.
If you own a property you have already depreciated, you may create a tax deduction for your business by entering into a gift-leaseback transaction. Typically, the property is gifted to your spouse or children, to whom you then pay rent.
If you add a building or make other permanent improvements to leased property, you can depreciate the cost of the improvements using MACRS depreciation.
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