Office rent expense

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steph_ellis
steph_ellis Member Posts: 2 Newcomer

Hi I own a small business and live with my boyfriend. I pay him a small amount of rent to use one of the rooms in the home we both reside in as my office. Can I deduct the rent I pay him as my office rent expense on my schedule C?

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  • PhillipB
    PhillipB FreeTaxUSA Team Posts: 33
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    The rent you are paying for the office space in his home can work as a deductible expense. I have a few questions:

    1.) Are you also liable for rent, utilities, and other expenses on the home you live in together?

    2.) Do you have a written rental agreement for the rent of the room?

    If there is an obligation to pay other household expenses (expenses for the whole home) you can report everything through the home office expense section. The non-office space expenses would be reported in the Indirect Expenses screen, and the office space related expenses will be reported on the Direct Expenses screen of the home office expenses section of your Schedule C.

    For the office space expenses, include the rent and any expenses that are completely separate from the other household expenses. For example, you have a separate rent expense for the office room. If there is a separate bill for the internet or telephone for that room, include those items as direct expenses.

    All expenses that are shared through the whole house should be reported as indirect expenses. For example, while your rent is separate, you also use the same internet as the rest of the house. The internet expense is an indirect expense.

    If you are not liable for any other household expenses besides the office room rent, you could simple deduct the office room rent in the Common Expenses screen of the Your Business section.

  • steph_ellis
    steph_ellis Member Posts: 2 Newcomer
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    He owns the home and pays the mortgage and utilities.

    We do not have a written rental agreement. Is that something that has to be very official where I'd need a lawyer to draft it, or could we just have a basic document that we both sign with the monthly rent amount?

    Thanks!

  • PhillipB
    PhillipB FreeTaxUSA Team Posts: 33
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    I would get a written agreement - any standard rental agreement that you can find online will do. For you to claim a home office expense, there needs to be a liability to pay the rental expense for all of the year.

  • CoryF
    CoryF FreeTaxUSA Agent Posts: 65
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    Thank you for this response, Steph.

    You do not need to have a lawyer draft an official Rental Agreement. Only that you need to have it written on paper, with details like monthly rent, and you can have a Notary Public witness the signatures to make it more official. Then you can deduct the Rent paid. However, your boyfriend will need to include the Rental Income on his tax return.

    To make it even more official, you can file a 1099-MISC for rents totaling more than $600 in a year. The IRS has a free file 1099 site that you can use for this purpose. The 1099-MISC for Rents must be filed before January 31st of the year following the tax year. Meaning for 2024 rents, you must file a 1099-MISC before January 31, 2025.