Self Rental

If you have a business and also charge rent to the business since you own the business office, then how does the IRS treat the rental income from the office property? You can deduct the rental expense on your business tax return but the rental income from the office, which is usually reported on schedule E, is considered non passive if you have a profit and passive if you have a loss. This is to prevent the taxpayer from creating passive income to offset other passive losses. In my opinion, the best way to handle this situation is to structure the rental rate to break even on schedule E.