: Renting from self during out of area remodel project - deductible? I own a nightly rental that's out-of-area. I was considering moving to that area for a month and renting and living in my own property while I (personally)

Vote Up Vote Down   0 Reactions

Login to give Reaction!

There are certain situations where you could legally pay yourself rent, but it'd be in the context of multiple business entities interacting, never in the context of an individual renting their own property.

Even if you could, any rent paid to yourself would count as rental income, so there'd be no benefit.

Edit: I was hunting for examples where it might be acceptable, and didn't, but I found a good explanation as to why it is not acceptable from Brandon Hall on a BiggerPockets post:

To get technical, you will be going up against the Economic Substance
Doctrine which states that a transaction has economic substance if:
(1) the transaction changes in a meaningful way (apart from Federal
income tax effects) the taxpayer’s economic position; and (2) the
taxpayer has a substantial purpose (apart from Federal income tax
effects) for entering into such transaction.

By transferring your primary residence into a LLC, you would not be
changing your economic position. Further, you do not have a
substantial purpose for entering into such transaction other than to
simply avoid paying federal income taxes.

So it might make sense if multiple people owned the LLC that owned the property you wanted to rent, and there are instances where company X owns holding company Y that owns an office building that company X rents space in. But if you're the sole player in the LLC's then it sounds like a no-go.