2018 I bought a commercial building for my business. I wrote down the depreciation and the expenses for it on schedule C. Then I got the bright idea to help me with expenses to rent the back out and the side of the building out. I would like to switch to schedule E. Do I just move the rental income to a schedule E? Do I need to move over the depreciation to the schedule E? If so how would I do that? My business uses a major portion of the building and I've been paying property taxes and the building payment throught my business. Please advise.
Read through the thread at the link below.
All you do is add the rent to the income from your Sch C and continue to deduct the regular expenses depreciation like usual.
A lot of this will depend on your set up. If you are a sole proprietorship, chances are the building is in your name.
If the building is in your name, then technically, you are the one renting the building, not your business. If you are providing services with the rental, then the income could be reported on a Schedule C as income from a business.
If you are simply renting the space to someone then this would be reported on Schedule E as rental income.
You would then prorate the building expenses between the business and rental. So, if your building has a depreciable base at this point of $100,000 and your business uses 65% of the building and the tenant uses 35%, you would use $35,000 for the depreciation base for the rental and $65,000 for the business depreciation base. Property taxes, utilities, maintenance and other expenses would also be prorated based on the percentage of use.