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gggmft
New Member

I lease office space for my therapy practice. I sublet one office in the suite. Do I report the income from the sublet on Schedule E and the rent I pay on Schedule C?

 
2 Replies
DanielV01
Expert Alumni

I lease office space for my therapy practice. I sublet one office in the suite. Do I report the income from the sublet on Schedule E and the rent I pay on Schedule C?

Maybe.  A lot will depend on local law treatments as much as the nature of the income itself.  Most rental income is not subject to self-employment tax, whereas business income is.  An office sublet can be considered rental income independent of the remaining business income, but the expenses must be consistent also.  Therefore, if you claim the rental on Schedule E, you cannot claim the entire office rent on Schedule C, but must allocate the office rental expense between the percentage of the office receiving business income (Schedule C) and the percentage that you are renting.

Example:  You are renting the office for $2500/month, and 20% of the floor space is what you are subletting.  You charge your sublesee $800/month for the space, and receive this amount all 12 months.

Your rental income is $9600 ($800 x 12 months), and your rental expense is $6000 (20% of office space, or $500/month for 12 months).  Your Business Expense deduction is $24000 (remaining $2000/month for 12 months).

Again, though, you want to make sure that your treatment is consistent with local law as well.  If your locality treats your business rental as active rather than passive income, you would report the income on Schedule C as well.  (The entire rent would also be deducted on Schedule C in this case also).

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gggmft
New Member

I lease office space for my therapy practice. I sublet one office in the suite. Do I report the income from the sublet on Schedule E and the rent I pay on Schedule C?

Thanks for responding.  We don't set rates based on square footage for subletters.  It is based on how many days a week they use the office, which varies.  If I have paid a total of $20,000 to the landlord for rent, and I've collected a total of $10,000 in rental payments, do I just declare $10,000 as a business expense on schedule C?
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