Tags: CPA Sarasota, QuickBooks Bookkeeping, Sarasota Accounting, Tax Planning

If you want to convert your home to a rental property, you can improve your tax benefits by selling it to your S corporation.

Benefits of Selling Your Home to Your S Corporation

  • Tax savings on home sale profit. By selling your home to your S corporation, you can utilize the home-sale profit exclusion—up to $500,000 for married couples—to avoid taxes on gains from the sale, assuming you meet the eligibility criteria.
  • Increased depreciation deductions. The transaction increases the depreciable basis of your property, resulting in higher annual depreciation deductions.

Addressing Common Doubts

  • Property tax concerns. While the sale may increase property taxes due to reassessment at the current market value, the overall financial benefits from tax savings on the gain and increased depreciation often outweigh these additional costs.
  • Homestead exemption. Selling your home will indeed result in losing any homestead exemption benefits. But the same is true if you convert it to a rental property. Thus, the homestead exemption is a non-issue because you lose it in either case.
  • Related-party sale concerns. Although selling to your S corporation is a related-party transaction, it is legitimate under tax law. The impact for you is that the profit on the sale is subject to ordinary income treatment. But to the extent you can use your home-sale exemption against the profit, you don’t pay federal taxes on that ordinary income.

Implementation Steps

  • S corporation. You have the most flexibility when you create a separate S corporation to hold your old home as the S corporation’s rental property.
  • Appraisal. Obtain an independent appraisal to establish fair market value for the transaction.
  • Formal procedures. Use professional services for title transfer and legal documentation to ensure the sale mirrors an arm’s-length transaction.
  • Documentation. Maintain proper records and documentation to support the transaction’s validity, should the IRS ever want to examine it.


Selling your home to your S corporation before converting it into a rental property can offer substantial financial advantages. While there are considerations such as increased property taxes, the potential tax savings and increased cash flow typically provide a net positive outcome.

How We Can Help

Sterling Tax and Accounting is here to help your business with tax planning! Our comprehensive approach to tax planning helps reduce your overall tax liability and keep more money in your pocket. If all your accountant does is file your taxes, chances are they are making you pay more than your fair share of taxes.

Learn how to proactively save on taxes by scheduling a call with our tax planning specialists.

Our tax planning, accounting & business services help you stay on track. Sterling Tax & Accounting will work with you to optimize your business and minimize your taxes. We will work to provide you and your business with the tools and resources you need to build a solid tax and business foundation. We’re a trusted CPA Firm in Sarasota, Florida. We serve clients all over the US, and proactively work to minimize their taxes.

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