Should You Pay Yourself Rent for Your Home Office?

The idea

An S-corp owner has a home office. The S-corp pays the owner rent (deductible to the corp), which the owner reports on Schedule E as rental income — possibly offset by home-office expenses. Sounds like a way to convert wage income to rental income (avoiding payroll tax) or to claim a home-office deduction without the Schedule C loss limitation.

Section 280A(c)(6)

Section 280A(c)(6) blocks the strategy. When an employee rents space to an employer (including an owner renting to their own corporation), the employee CANNOT claim home-office deductions to offset the rental income. The result: you have rental income with no offsetting deductions — the worst possible outcome.

The accountable plan alternative

A better approach is an accountable plan reimbursement. The S-corp adopts an accountable plan, the employee submits a substantiated home-office expense report, and the S-corp reimburses the employee tax-free. The corporation deducts the reimbursement; the employee receives the cash without income recognition. Properly structured, this captures the home-office deduction at the corporate level.

Documentation

The accountable plan needs a written policy, a reasonable expense reimbursement process (substantiation, return of excess), and a business connection. Most CPA firms have template plans. Reimbursable expenses include the same items deductible on Form 8829: business-use percentage of utilities, insurance, depreciation, and so on.

Sole prop has no analog

A sole proprietor doesn't have this problem because they take the home-office deduction directly on Form 8829 — there is no "employer" to reimburse them. The accountable-plan strategy is specific to S-corps (and to a lesser extent C-corps).

When to bring in a professional

DIY tax software handles most small-business returns competently, but a handful of situations reliably justify a CPA or enrolled agent: an entity formation or election, a multi-state filing situation, a significant fixed-asset purchase that triggers Section 179 or bonus depreciation modeling, a retirement-plan setup, an IRS notice or examination, and the year of an entity sale. Outside those situations, software plus an annual half-day of personal review produces a defensible return. The cheapest professional engagement is a one-hour consultation rather than a full-service tax-prep relationship.