A simple strategy may save you money on taxes
A business doesn’t have to own all its operating assets. Leasing your personally owned property, such as a building, vehicle, or equipment, to your incorporated business may be a good tax savings strategy. Similarly, another corporation, a partnership, or a family business in which you have an ownership interest may lease assets to your corporation. In addition to possible tax savings, you may not want your corporation to own a lot of assets if you are in a business where lawsuits are common. Leasing instead of owning is one way to insulate assets from potential creditors.
To avoid potential problems with the IRS, lease terms between you and your corporation must be fair to both sides. The contract should be legally binding and the payments should be set at the same rate you would charge anyone else. Lease payments are deductible expenses to the corporation, while lease income is taxable to you. In turn, you’ll get to deduct costs of ownership, such as mortgage interest, maintenance, repairs, depreciation, acquisition interest, insurance and administrative costs.