Rent or Lease

Accounting Services For Small Businesses – Rent is any amount paid for the use of property not owned by the taxpayer. The following rules apply to rent or lease payments.

·         Rent is deductible as a current expense if the taxpayer does not receive equity or title to the property being rented.

·         If an amount is paid to cancel a business lease, the amount is deductible as rent.

·         A rental deduction for unreasonable rent is not allowed. Ordinarily, the issue of unreasonableness arises only if the taxpayer and lessor are related. Rent is not unreasonable just because it is computed as a percentage of gross sales.

·         If rent is paid in advance, deduct only the amount that applies to the use of the rented property during the year. The rest of the rent payment is deductible over the period to which it applies.

·         If the taxpayer is leasing business property, the taxpayer can treat taxes paid on the property as deductible rent.

·         The cost of getting a lease is amortized over the term of the lease.

 

Need More Information?

ABA Tax Accounting

 

Amare Berhie, Enrolled Agent

Licensed by the IRS

amare@abataxaccounting.com

651-300-4777

 

https://www.abataxaccounting.com/smallbiz.php