In this short instructional video, the speaker compares the traditional Business Use of Home (BUH) deduction with a corporate rent strategy that leverages an LLC to lease personal living space to the business. He explains how the BUH deduction works—calculating a percentage of home expenses (mortgage interest, property tax, utilities, maintenance) based on the square‑footage used for business, the need to claim 100 % of those expenses on the tax form, and the audit risk because the IRS requires exclusive business use. He outlines the simplified $5‑per‑square‑foot method, its $1,500 cap, and why it often underperforms. The corporate rent alternative involves the LLC signing a lease for one day per month (or per event), allowing the business to deduct rent as an ordinary and necessary expense while the individual does not report the rental income, effectively turning a distribution into a deductible expense. He recommends a standard rate of $1,250 per day, advises using comparable vacation‑rental listings to justify higher rates, and stresses the importance of board‑meeting minutes and other documentation to survive an audit. The speaker concludes with a call‑to‑action: set up an automatic $1,250 transfer from the business account to the personal account and adopt the strategy immediately, promising further videos and a database of similar tax‑saving tactics.
Chapters
You can take that percentage as a deduction for your mortgage payments, maintenance, things like that. As an example, let's say I have a 1,000 square foot home and I have a 100 square foot business space. That's 10%, so I would get to claim 10% of my mortgage interest and And property tax on my business use of home form on my personal return. I could claim 10% of my utilities. I could claim 10% of maintenance. Now the form on the tax return is not super straightforward, and so you actually need 100%, like you have to claim 100% of those deductions on the form, and then based on the business use percentage, it calculates how much you get of the business deduction. Here's the kicker though, the business use of home tax form is a trigger to be audited by the IRS. That's the reason they set up the form in the first place. You know why? Because their rules say it has to be for exclusive business purpose, which means they, on a technicality, could argue if you answered A personal phone call in the business space, that it is no longer exclusive for business purpose, and they can disallow the whole deduction in the first place. We don't love the Business Use of Home tax form. The IRS has created a simplified form if you want to claim this. Instead of labeling out What's my total utilities, repairs, maintenance, mortgage payments, things like that. They just say, we'll allow you to take $5 a square foot of your home office space up to 300 square feet. So if my home office space is larger than 300 square feet, this might hurt me. If my utility expenses and things like that are more expensive, the $5 a square foot might hurt me. But that would create a $1,500 $1,500, like the calculation would max out at $1,500 for the simplified formula. So $1,500 of a deduction, that doesn't mean you save $1,500 in taxes. And I'm emphasizing that because the business use of home as a tax strategy is so inferior to what the Augusta Rule And the corporate rent rule will do for you. The LLC is gonna sign a simple lease agreement with you as a person to rent your living space from you 1 day per month. So you do the math, that's 12 times a year. So you're not having a rental activity. However, on the business side, you are going to claim a rent expense. Because based on tax rules, that rent expense is ordinary and necessary, and it qualifies as a tax deduction. So I'm going to lower my business taxable income on the profit and loss statement, which lowers— which flows to my personal return. But on my personal return, I don't have to claim the rental income. So it's a way for us to take a distribution and basically turn it into an expense. We recommend that as a universal rule, $1,250 for the day use is standard. It's not super high. It's like a qualified amount. Now, if you live in an area where you feel like $1,250 for the day use isn't high enough, you can go to websites that are for vacation rentals. Find a house similar in size to what you have, similar in geographical area, and if they're renting— if a day rent at those spaces is more than $1,250, then go ahead and take a screenshot, save that information, because that's your proof if you're audited as to why you're charging an amount higher than the $1,250. If you happen to have big events at your property, you could justify a larger price for that bigger event. So the normal meeting, the normal flow structure for the strategy is I have a board meeting, and often I might be the only one present. I'm gonna try to have someone else there that's on my meeting minutes that says, you know, maybe Ryan went on that board meeting, or maybe my wife Kara was there. Um, but in general, it's me, maybe a second person, and that's going to be my $1,250 scenario. But if I am having an event at my house, whether that's team members coming over or clients coming over, it's going to be 5, 10 people, maybe 20, 30, 50 depending on your home. The bigger the event, the larger you could charge for that event because Now you want to think about, what would I have to pay if I hosted this at a hotel? What would my cost be? Well, then that's your market rate for renting the home space. You know, that could be $20,000 for the day use because that's what a hotel would have charged you had you had the event at their location. So keep that in mind. So I hope this was insightful. Home office versus the corporate rent strategy. We recommend corporate rent strategy. We gave you the steps you need to take. We recommend implementing this as soon as possible. It's going to take you 3 minutes to go and log into your bank account, create an auto transfer of the $1,250 from your business account to your personal account. Do it today. Take advantage of the strategy. And there are going to be more of these videos to come. We have a whole database of these and are just Our whole desire is to help keep money in your pocket because we think the IRS sucks.
