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Level 1

rent to own shed for Sole Proprietor home business

This is my first year filing as  a Sole Proprietor. I have a rent to own shed I use 100% for my home business. I am trying to figure out where to put this information on my taxes. I have interest I pay every month along with the payment. I'm not sure if I should put the interest in as "mortgage interest" for just the business or do I not claim any payments and somehow claim shed under Assets to be depreciated?

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Expert Alumni

rent to own shed for Sole Proprietor home business

For now, just report the rent on that shed as a rent expense, until you actually gain ownership of your shed. Once you are officially the owner, then you can start reporting and depreciating the asset. Be sure to keep a record of all of your costs of improvements because will be added to the basis of your shed.  The total basis is the basis of depreciation you will use to begin depreciation of your shed, once you fully own it. Meanwhile, report your rent as a miscellaneous rental expense and give a description such as rent expense for a right to own shed.

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Expert Alumni

rent to own shed for Sole Proprietor home business

if this is used in conjunction with your main business, you can include the income as business income. You can claim the mortgage interest as part of the mortgage interest in your house.

 

You are correct in that you will consider this as a business asset that needs to be depreciated over a period of time.

 

if this shed however is incidental to your main business, you would need to report this under rent/royalty income in a Schedule E and not a Schedule C., 

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Level 1

rent to own shed for Sole Proprietor home business

there is no income so I'm not sure what I wold put under income. The shed is where I have my home business, I pay monthly 377.28 (355.09 + 22.19 tax).I finished the inside of the shed; it was just rough finished when I purchased it. Do I put the total of what I will pay when finished paying it off plus the total cost of improvements as the cost of the asset?

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Expert Alumni

rent to own shed for Sole Proprietor home business

For now, just report the rent on that shed as a rent expense, until you actually gain ownership of your shed. Once you are officially the owner, then you can start reporting and depreciating the asset. Be sure to keep a record of all of your costs of improvements because will be added to the basis of your shed.  The total basis is the basis of depreciation you will use to begin depreciation of your shed, once you fully own it. Meanwhile, report your rent as a miscellaneous rental expense and give a description such as rent expense for a right to own shed.

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Level 2

rent to own shed for Sole Proprietor home business

I, through RENT A CENTER, about 6 months ago was paying rent to own on a TV at $26.23 a week. During this period I had 2 late payments. I need to report this on my taxes? Do I need to show receipts or just the last one

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Expert Alumni

rent to own shed for Sole Proprietor home business

No, you do not need to report this on your tax return since the rental is not related to a business.

 

If you were renting the TV and deducting the amount through a business you would report only the amounts you paid.

 

@foxx1935

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