This one comes up a lot, so let us clear it up. The idea is that you personally buy office furniture, then rent it to your S or C corporation to create tax savings. It sounds clever. In practice, it usually does not save you anything.
In most cases your corporation gets the same depreciation deduction whether it buys the furniture directly or rents it from you. Current law lets both new and used business furniture qualify for 100 percent bonus depreciation when eligible, so the deduction ends up about the same either way. What personal ownership adds is complication. Renting furniture to your own corporation can mean extra tax reporting, more record keeping, and in some cases the rental income gets exposed to self-employment tax. Trying to expense the furniture under Section 179 adds even more hurdles.
It is worth understanding why the structure quietly backfires. When you rent property to a business you actively work in, the tax rules recharacterize that rental income so it cannot be conveniently sheltered by other passive losses, and you take on extra reporting on Schedule E, possibly a 1099, and a paper trail you have to maintain for as long as the arrangement lasts. Meanwhile, the very depreciation you were chasing is available to the corporation directly if it simply buys the furniture, because current law lets most business furniture be written off right away. You are taking on complexity and audit exposure to reach a deduction the company already had.
Leasing does make sense in the right situation, so it is worth naming when. Arm’s-length leasing is a real strategy: leasing equipment from an unrelated company to preserve cash, or using a genuine separate leasing entity built for liability or estate-planning reasons with proper legal structure and advice behind it. Renting your own desk to your own S corporation is not that. If you have already bought something the business uses, the clean fix is usually to have the corporation reimburse you under an accountable plan, or buy the asset from you at fair value, rather than standing up an ongoing rental. When in doubt, the simplest structure is almost always the most defensible.
What this means for you: For almost everyone, the simplest and most tax-efficient move is to have the corporation buy the furniture directly. You get the deduction without the paperwork or the traps. If someone has pitched you the rental idea, run it by us before you set anything up.
