Renting directly from a landlord (apartment/room)

Hi there,

Can an LLC rent an apartment or office space from an individual? I’m also wondering how to properly write off those expenses, what red flags to watch out for, and what specifically needs to be in the lease agreement. Also, what’s the best way to handle payments and accounting to make sure everything stays fully compliant with the IRS?

Of course it’s possible.
The real trick is checking if there are specific requirements for your office space—things like minimum technical specs or whether the unit actually needs to be officially zoned for commercial use.
Once that’s settled, you just sign a Contract Corp and handle the payments via bank transfer. You could technically pay in cash, but honestly, I always prefer having a digital paper trail through the bank. 😁
Here’s a template for a Contract Corp if you want to see how they're usually structured...

The basis for justifying any expenses is the Contract Corp under which you pay your landlord (no Contract Corp, no expense justification).

The landlord is responsible for reporting this to the IRS since they owe taxes on it (though that’s hardly your concern)

You can also justify utility costs for the space if you're footing the bill (electricity, water), provided there are separate meters

The folks over at the IRS told me I didn't even need to bother attaching a copy of my rental Contract Corp, even though I had it right there in my hand. Apparently, they just run their own numbers to figure out the estimated tax, since the landlord is going to report that rental income on their own tax return anyway.

It’s entirely possible that one local office handles things differently than another; I’ve definitely noticed some inconsistent practices here and there. At this point, who knows what kind of mood they'll be in when you walk through the door? 🤣

I suspect registering the Contract Corp with the IRS is strictly the landlord's responsibility... they're the ones on the hook for the taxes, while the tenant just handles the rent

hollowharbor56 said:I suspect registering the Contract Corp with the IRS is strictly the landlord's responsibility... they're the ones on the hook for the taxes, while the tenant just handles the rent

Spot on—only the landlord is going to face heat from the authorities if the Contract isn't filed. You’ve got an 8-day window from the signing date to report it to the tax office, after which the landlord gets hit with a notice from the IRS demanding payment. If the government decides the price listed in the Contract matches market rates, the landlord's liability is basically 100 minus a 30% deduction (standard allowance) times a 15% tax rate, plus whatever local state surcharges apply based on where they live.

I’m telling you again, it seems like every single office operates differently. When I was handling all the paperwork for my landlord—everything from the initial filings to the local registry—I made sure to have the Contract right there in my hand. I didn't want to leave any room for error or cause anyone unnecessary headaches. But when I showed up, they told me I didn't even need it because they handle the tax prepayments themselves.

They didn't end up asking me for the Contract, but honestly, I’d tell anyone: just bring the Contract with you and check in with your tax agent. It’s much better to ask twice than to mess up once.🧐

By the way, I actually had an inspector drop by recently. They just wanted to take a quick look at the Contract and verify that the rent payments were being handled correctly, and everything passed without a hitch.😁

I suspect the tax assessment works like this: if the Contract specifies a price higher than the local average for that neighborhood, they lock in that higher rate for taxation. If it happens to be lower, they just bump it up to the average... You can't win against these people. 😳...

I completely get where you're coming from regarding justifying the rent expense itself, but I’m hitting a wall on this next part:
The > explicitly states that the tenant is responsible for paying the rental tax prepayment. Typically, that's the landlord's job—and naturally, the bill is issued in the landlord's name—yet the tenant is the one actually cutting the check. How on earth am I supposed to justify that?

So you’re paying taxes on that too? Interesting. 😂

Ideally, you’d just write the gross amount into the contract so the entire sum counts as the rental expense.

Section 50 of the Internal Revenue Code

(1) Regarding income from property—specifically rental and lease income, excluding short-term rentals of apartments, rooms, or beds to travelers and tourists or campground operations under Section 44 of this Code—tax prepayments are determined by an IRS notice and must be paid by the last day of the current month. When calculating these prepayments, the taxpayer's standard deduction under Section 36 isn't taken into account. The taxpayer settles these income tax prepayments following the procedures outlined in Section 47 at a rate of 15%.

(2) Income tax prepayments from property rights are calculated, withheld, and remitted by the payor as withholding at the same time the income is distributed. This is applied to the total compensation at a rate of 25%, without applying the standard deduction found in Section 36.

(3) Income tax prepayments regarding the sale of real estate and property rights are paid by taxpayers according to an IRS notice. This is a one-time payment per individual transaction, due within 15 days of receiving the IRS notice stating the determined income tax. The prepayment is calculated based on the tax base defined in Section 27, subsection 5, using a rate of 25%.