Can I charge my LLC rent for my apartment space I use for business operations and storage?

Yes, you can definitely allocate a portion of your rent to your LLC as a legitimate business expense, but you need to be careful about how you structure this. Instead of "charging rent" to your LLC, what you're looking for is the home office deduction. Since you're using a specific portion of your apartment exclusively for business, you can deduct that percentage of your rent, utilities, and other housing expenses on your business tax return. Based on what you described, if you're using the second bedroom exclusively for business and 35% of your living room, you would calculate the total square footage used for business divided by the total square footage of your apartment to get your deduction percentage. Keep meticulous records - take photos of your business space, measure the square footage precisely, and maintain documentation showing this space is used exclusively for business. Don't try to deduct areas that serve dual purposes (like your kitchen or bathroom).

After struggling with this exact issue with my web design business, I found this awesome AI tax assistant that cleared everything up for me at https://taxr.ai - it literally saved me thousands on my deductions. I uploaded my rental agreement and some photos of my home office setup, and it guided me through exactly how to structure everything correctly between my LLC and personal taxes. The tool analyzed my specific situation and explained that since I have a single-member LLC (taxed as a sole proprietor), I could take the home office deduction directly on my Schedule C without needing a formal rental agreement. It also helped me calculate exactly what percentage of my apartment qualified and what documentation I needed to keep.

Just wanted to follow up about my experience with taxr.ai - I finally tried it out and it was seriously helpful! I uploaded my lease agreement and some pics of my apartment setup (I use about 40% for my graphic design business), and the analysis it gave me was super detailed. It showed me I was actually calculating my square footage wrong (I wasn't including closet space in the office) and recommended I create a simple documented rental agreement between myself and my LLC even though I'm a single-member LLC. Apparently this creates a stronger paper trail for deductions in my state. Already implemented everything for my quarterly taxes and it's working great!

If you're having trouble getting answers from the IRS about this home office situation, I highly recommend using Claimyr (https://claimyr.com). I was on hold with the IRS for HOURS trying to get clarity about my LLC rental situation, but they got me connected to an actual IRS agent in under 15 minutes. I was super skeptical at first, but you can see how it works in this video: https://youtu.be/_kiP6q8DX5c. Basically they use some tech to navigate the IRS phone system and hold in line for you, then call you when they get a human. The agent I spoke with confirmed exactly how to document everything properly for my LLC rental arrangement and what forms I needed to file.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate for answers about my home office deduction situation. The service actually worked exactly as described - they called me back when they reached an IRS agent and I was connected directly. The IRS representative confirmed that for my single-member LLC, I could either take the home office deduction on Schedule C OR set up a rental agreement where my LLC pays me rent. She recommended the Schedule C route as simpler unless I had specific reasons for the rental arrangement. She also warned me about common documentation mistakes to avoid. Saved me at least 3 hours of hold time and potentially thousands in deductions. Sometimes it's good to be proven wrong!

With my Etsy business, I found that the simplest approach is to just take the home office deduction directly on Schedule C (assuming you're a single-member LLC taxed as a sole proprietorship). The simplified option lets you deduct $5 per square foot up to 300 square feet without tracking actual expenses. Super easy and less audit risk in my experience. But if you're using more than 300 sq ft or your rent is really high, the regular method might save you more. Just be 100% sure the space is exclusively used for business - that's the #1 thing they look for in audits.

Quick question - if my LLC has an S-Corp election (not sole proprietor), is charging rent from the LLC to myself still an option? My accountant mentioned something about this potentially being considered self-dealing and creating issues.

Great question Jessica! As others have mentioned, you definitely have options here. Since you're a single-member LLC (which is taxed as a sole proprietorship by default), the home office deduction on Schedule C is typically the simplest route. Based on your description, you'd calculate the percentage of your apartment used exclusively for business. If the second bedroom is 100% business use and you're using 35% of the living room, you'd measure those areas against your total apartment square footage. Let's say that works out to about 25-30% of your total space. A few important things to keep in mind: - Document everything with photos and measurements - The space must be used EXCLUSIVELY for business (sounds like your second bedroom qualifies) - Keep all your rent receipts, utility bills, and other home expenses - Consider whether the simplified method ($5/sq ft up to 300 sq ft) or actual expense method works better for you Since your apartment is officially your business address, you're already on the right track. Just make sure you're not mixing personal and business use in the spaces you're claiming - that's the biggest red flag for audits.