Sell Your Home to Your S Corp to Convert it into A Rental
A couple sells their primary home to their S corporation.
Can they rent the house from the S corporation?
The strategy behind creating an S corporation and then selling your home to that corporation comes into play when:
- You want to convert your home to a rental property and take advantage of the exclusions, or
- You need more time to sell the home to realize the benefits of the $250,000 exclusion ($500,000 if filing a joint return).
With this strategy, one question often comes up: If a married couple sells their home to their S corporation to be a rental property, can the owners be the renters?
The Answer?
No. In this situation, the tax code treats your S corporation as you, the individual taxpayer, and thus you would be renting from yourself, which would produce no tax benefits.
In effect, the S corporation renting the residence to its owner is the same as homeowners renting their residence to themselves, and it produces no tax benefits.
On the other hand, your S corporation could rent the home for use as a principal residence to your son or daughter or other related parties, and the tax code would treat that rental the same as any rental to a third party.
If you are interested in exploring this strategy or you would like to see how much you will save with our tax advisory services, please book your free assessment here.
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