Q: I'm interested in the strategy you wrote about regarding collecting rent when you lease personal assets to your company. (See 10/17/05 issue.) If I rent assets to the company, am I then subject to Social Security tax on the net income? J.C.K., Hood River, Ore.
A: No, that's part of the beauty of the deal. Compensation paid out to employee-shareholders is subject to both income tax and employment taxes. But rental income isn't treated as compensation subject to employment tax, even if it's paid by your own company. You're only responsible for income tax on your net rental income (i.e., payments received minus qualified expenses). Tip: You must be able to show a legitimate business purpose for the arrangement. Otherwise, the IRS could call it a sham concocted just to avoid tax.
Like what you've read? ...Republish it and share great business tips!
Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...
We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.
The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.
" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/5560/avoid-employment-tax-on-rental-income "