Renting Your Home Office to Your S-Corp: The §280A(c)(6) Trap

Published: August 24, 2026 · Reading time: 9 min

TL;DR: Once you've elected S-corp status, "just rent my home office to my own corporation" sounds like the obvious move — the corp gets a rent deduction, you get rental income instead of wages. IRC §280A(c)(6) specifically blocks this: it disallows your home-office deduction against the rent you receive, so you owe full ordinary income tax on the rent with zero offsetting deduction for the utilities, insurance, HOA dues, or repairs you're actually paying to earn it. Congress added this rule in 1986, the same year a taxpayer won this exact argument in the Ninth Circuit — the case is Feldman v. Commissioner. In the worked example below, the same $1,350 delivered as a lease payment instead of an accountable-plan reimbursement costs the S-corp owner an avoidable $391.50 in extra tax.

Once you've elected S-corp taxation, the temptation is obvious: your corporation is a separate taxpayer now, so why not have it lease your home office from you like any other landlord-tenant arrangement? The corp deducts the rent as a business expense, and you collect it personally. It reads like clean, symmetric tax planning. It's actually one of the more reliable ways to create tax you didn't have to owe.

The Instinct — "Why Not Just Rent My Office to My Own S-Corp?"

The structure looks straightforward on paper: you own the home, your S-corp needs office space, and a lease agreement seems like the natural way to formalize what's already happening. Both entities are legitimate taxpayers, so a rent payment between them looks like any other arm's-length business transaction.

The Trap: IRC §280A(c)(6) Turns Off Your Deduction, Not Your Income

What the Statute Actually Says

IRC §280A(c)(6) reads:

"Paragraphs (1) and (3) shall not apply to any item which is attributable to the rental of the dwelling unit (or any portion thereof) by the taxpayer to his employer during any period in which the taxpayer uses the dwelling unit (or portion) in performing services as an employee of the employer."

Unpack the cross-references: §280A(c)(1) is the ordinary home-office deduction (exclusive, regular business use), and §280A(c)(3) is the deduction for renting out part of your home in general. §280A(c)(6) turns both of them off — but only the deduction side. Nothing in the statute excludes the rental income itself from your gross income. You still report every dollar of rent you receive as taxable income; you just can't offset it with the costs of providing the space.

What Survives — the §280A(b) Savings Clause

Not every home cost disappears. §280A(b) independently preserves any deduction "allowable to the taxpayer without regard to its connection with his trade or business" — in practice, mortgage interest and property tax, which are deductible on Schedule A regardless of whether any part of the home is used for business. Those two items survive the (c)(6) disallowance because they never depended on the business-use connection §280A(c)(6) is cutting off.

What Doesn't — Utilities, Insurance, HOA, Repairs, Gone for Good

Everything else that depends on the home-office connection — utilities, homeowners insurance, HOA dues, repairs and maintenance — is exactly what §280A(c)(1) and (c)(3) would normally let you deduct against rental-type income, and exactly what (c)(6) shuts off. You paid these costs to make the space usable as an office. You just can't deduct them against the rent that space generated.

Where This Rule Came From — Feldman and the 1986 Fix

This isn't an abstract anti-abuse provision drafted in the dark — it's a direct legislative response to a taxpayer who won. In Feldman v. Commissioner, 791 F.2d 781 (9th Cir. 1986), affirming the Tax Court (84 T.C. 1 (1985)), an accountant successfully deducted his home-office costs against rent his own firm paid him for the space. The Ninth Circuit sided with the taxpayer. Congress closed the loophole the same year: Pub. L. 99-514, §143(b) (the Tax Reform Act of 1986) added §280A(c)(6) to the Code, specifically overriding the result the courts had just reached. The rule exists precisely because this structure used to work — which is exactly why it's tempting today, and exactly why it no longer does.

The Right Way — the Accountable Plan Alternative

Sitting right next to this trap is a mechanism that accomplishes almost the same economic goal cleanly: an accountable plan reimbursement under Treas. Reg. §1.62-2. Instead of a lease, the S-corp adopts a written accountable plan and reimburses you for the business-use percentage of your actual home costs. Because it's a reimbursement under an accountable plan rather than compensation or rental income, it's excluded from your W-2 entirely — not partially offset, genuinely excluded — while the corporation still deducts the full amount as a business expense. See CentSense's guide to accountable plans for S-corp owners for how to set one up.

Worked Example: Same $1,350, Two Structures, One Avoidable Tax Bill

Priya, a graphic designer, has elected S-corp status. Her home is 2,000 sq ft; her home office is 300 sq ft, used exclusively and regularly for business — a business-use percentage of 300 ÷ 2,000 = 15%.

Her annual whole-home operating costs, of the type §280A(c)(6) disallows (deliberately excluding mortgage interest and property tax, which are preserved either way under §280A(b)):

Business-use share: 15% × $9,000 = $1,350.

Path A — Accountable Plan Reimbursement (Correct Structure)

• The S-corp reimburses Priya $1,350/year ($112.50/month) under a written accountable plan.
• Excluded from her W-2 → $0 additional taxable income to her.
• The S-corp deducts the full $1,350 as a business expense.
• At a 29% combined marginal rate (illustrative — 24% federal + 5% state), she keeps the full $1,350 of costs covered with $0 extra tax.

Path B — Lease Agreement (the Trap, Same $1,350 Changing Hands)

• The S-corp instead pays Priya $1,350/year as rent for the 300 sq ft office.
• Same $1,350 deduction on the corporate side — identical benefit to the business.
• Under §280A(c)(6), Priya must report the full $1,350 as taxable rental income — and none of the $1,350 in utilities, insurance, HOA dues, and repairs she actually incurred is deductible against it, because (c)(6) turns off both (c)(1) and (c)(3).
• Extra tax: $1,350 × 29% = $391.50, for an arrangement that delivered her the exact same $1,350.

The delta — $391.50 in avoidable tax — comes purely from choosing "rent" over "reimbursement" as the label for an identical cash flow.

Don't Confuse This With the Augusta Rule

CentSense's Augusta Rule guide covers a genuinely different, favorable fact pattern: §280A(g) lets you rent your home to your own business for fewer than 15 days a year completely tax-free — the rent is excluded from your income entirely, and the business still deducts it, a real two-sided win with no §280A(c)(6) problem because the exclusion operates under a different subsection. It's a cliff, not a per-day allowance: rent the home 15 days or more in the year and the exclusion doesn't apply to any of the rent — the entire year's amount becomes taxable, not just the days past 14. The trap in this article is the opposite fact pattern anyway: continuous, ongoing home-office use, day after day, all year. Continuous use never qualified for the §280A(g) exclusion in the first place — a monthly lease structured from the start lands squarely on §280A(c)(6) with none of §280A(g)'s protection.

The Second Trap Hiding Behind the First — Self-Rental Passive-Loss Recharacterization

Even setting the deduction disallowance aside, a lease between a shareholder-employee and their own corporation runs into a separate anti-abuse rule: under Treas. Reg. §1.469-2(f)(6), net rental income from property leased to a trade or business the taxpayer materially participates in is recharacterized as nonpassive income — meaning it can't be sheltered by passive losses from other activities. Net rental losses from the same arrangement, by contrast, stay passive and can't offset nonpassive income. The asymmetry means self-rental structures rarely create a usable tax shelter even before §280A(c)(6) enters the picture — one more reason the lease route doesn't pay off the way it initially looks like it should.

Who This Actually Applies To

§280A(c)(6) requires a genuine employer-employee relationship, so it reaches S-corp and C-corp shareholder-employees specifically. It does not apply to a sole proprietor, because there's no separate "employer" for a sole proprietorship to rent from — you simply claim the ordinary Schedule C home-office deduction. Partners in a partnership or multi-member LLC are governed by different mechanics entirely, outside the scope of this rule.

Already Have a Lease in Place? What to Do Next

This isn't an irrevocable election — it's just a bad structural choice you can stop making prospectively. You can't undo tax already reported on a filed return, but nothing prevents terminating the lease and switching to an accountable plan reimbursement going forward. If you've been running rent through payroll or your books this way, this is worth raising with a CPA before the next tax year, not after.

Frequently Asked Questions

Can my S-corp pay me rent for my home office?

Legally, yes — you can sign a lease. But IRC §280A(c)(6) blocks you from deducting any of the home-office operating costs against that rental income, so you pay full ordinary income tax on the rent with no offsetting deduction — a worse result than doing nothing, and much worse than using an accountable plan reimbursement instead.

Why can't I deduct my home office expenses against the rent I charge my own S-corp?

Because §280A(c)(6) specifically turns off both the home-office deduction (§280A(c)(1)) and the ordinary rental-use deduction (§280A(c)(3)) whenever the "landlord" is also an employee of the "tenant" corporation using the space to perform services for it. Only mortgage interest and property tax survive, because §280A(b) preserves those regardless of business use — everything else, like utilities, insurance, HOA dues, and repairs, is simply lost.

What's the difference between this and the Augusta Rule?

The Augusta Rule (§280A(g)) exempts home rental to your own business entirely from your income, while the business still deducts the rent — a genuine two-sided win. But it's a cliff, not a per-day allowance: the exclusion only applies if the home is rented fewer than 15 days in the year. Rent it 15 days or more, and the entire year's rent becomes taxable, not just the days past 14. This is the opposite fact pattern anyway — continuous, ongoing home-office use — which never qualifies for the exclusion in the first place and runs headlong into §280A(c)(6) instead.

Is there any way to get a home-office tax benefit as an S-corp owner?

Yes — an accountable plan reimbursement under Treas. Reg. §1.62-2. The corporation reimburses you for the business-use percentage of your actual home costs; the reimbursement is excluded from your W-2 and fully deductible to the corporation. It's the standard, clean mechanism for an S-corp shareholder-employee to get a home-office tax benefit.

Does this rule apply to sole proprietors or partnerships too?

No. §280A(c)(6) requires an employer-employee relationship, so it applies only to C-corp and S-corp shareholder-employees. A sole proprietor is the business — there's no separate party to rent to — and simply claims the regular Schedule C home-office deduction. Partners in a partnership or multi-member LLC are governed by different mechanics entirely, not this section.

Authoritative References

• 26 U.S.C. §280A — Disallowance of certain expenses in connection with business use of home, rental of vacation homes, etc.
• 26 CFR §1.62-2 — Reimbursements and other expense allowance arrangements
• 26 CFR §1.469-2 — Passive activity loss
• Feldman v. Commissioner, 791 F.2d 781 (9th Cir. 1986), aff'g 84 T.C. 1 (1985)

Related reading: Accountable plan for S-corp freelancers · The Augusta Rule for freelancers · S-corp election for freelancers · Home office deduction: simplified vs. actual

Get Your S-Corp's Home-Office Reimbursement Right the First Time

Whether you're setting up an accountable plan or just tracking the home costs an accountable plan will reimburse, the record-keeping is the same: every utility bill, insurance statement, and repair receipt tied to the right month. CentSense scans and categorizes each one automatically, so building an accurate reimbursement request is a matter of minutes, not a year-end scramble. Free tier includes 10 AI scans per month; Solo is $5/month for unlimited scanning and mileage logging.

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This guide is general education for U.S. freelancers and small-business owners covering the 2026 tax year. It is not personalized tax advice. Whether your specific arrangement triggers §280A(c)(6), and how to structure or unwind an accountable plan, depends on facts a CPA or EA should review before you act.