By Many business owners believe they can save on taxes by personally buying office furniture and then renting it to their S or C corporation. While this strategy sounds appealing, it generally does not produce any additional tax savings.
In most cases, the corporation receives the same depreciation deduction whether it buys the furniture directly or rents it from you. Current tax law allows both new and used business furniture to qualify for 100 percent bonus depreciation when eligible, so the tax deduction is generally the same either way.
Personal ownership can also create unnecessary complications. Renting furniture to your corporation may require additional tax reporting, increase the burden of record keeping, and (in some situations) expose the furniture rental income to self-employment tax. Attempting to expense the furniture under Section 179 can add even more hurdles.
For most business owners, the simplest and most tax-efficient approach is to have the corporation purchase the furniture directly. This allows the corporation to claim the deduction without the added paperwork or potential tax traps associated with a personal property rental arrangement.
If you want to discuss renting equipment or furniture to your corporation, please call me directly at 408-778-9651