top of page
  • Instagram
  • LinkedIn
  • Whatsapp

Benefits of Selling Your Home To Your S-Corp

Keize Associates CPAs

Updated: Aug 1, 2024

Convert Your Home to a Rental Property with Tax Benefits

Thinking about converting your home into a rental property? Learn how selling your home to your S corporation can maximize your tax benefits and improve your financial outcomes.



Benefits of Selling Your Home to Your S Corporation


  1. Tax Savings on Home Sale Profit:Utilize the home-sale profit exclusion—up to $500,000 for married couples—to avoid taxes on gains from the sale, assuming you meet the eligibility criteria.

  2. Increased Depreciation Deductions:Increase the depreciable basis of your property, resulting in higher annual depreciation deductions.



"Selling your home to your S corporation before converting it into a rental property can offer substantial financial advantages." – Simone Keize, CEO

Addressing Common Doubts:


Property Tax Concerns:


While the sale may increase property taxes due to reassessment at the current market value, the overall financial benefits from tax savings on the gain and increased depreciation often outweigh these additional costs.


Homestead Exemption:


Selling your home will indeed result in losing any homestead exemption benefits. However, this is a non-issue as you lose it regardless when converting to a rental property.



Related-Party Sale Concerns:


Selling to your S corporation is legitimate under tax law. The profit on the sale is subject to ordinary income treatment, but utilizing the home-sale exemption can avoid federal taxes on that ordinary income.


Implementation Steps:


  1. S Corporation Setup:Create a separate S corporation to hold your old home as its rental property for maximum flexibility.

  2. Appraisal:Obtain an independent appraisal to establish the fair market value for the transaction.

  3. Formal Procedures:Use professional services for title transfer and legal documentation to ensure the sale mirrors an arm’s-length transaction.

  4. Documentation:Maintain proper records and documentation to support the transaction’s validity for IRS examinations.



Food For Thought


Selling your home to your S corporation before converting it into a rental property can offer substantial financial advantages. Consider the potential tax savings and increased cash flow against increased property taxes and the loss of homestead exemption for a net positive outcome.

1 Comment


Lisa de geneste
Lisa de geneste
Aug 30, 2024

I would like more information on selling my home to my S Corp.

Like
bottom of page