DEFINITION of 'Rent Expense'

The cost incurred by a business to utilize property. Business can take rent expenses as a tax deduction, provided that the property is used for business purposes, the cost is reasonable, and no equity or ownership in the property is accumulated from the rental payments. Property taxes paid on rental property can also be deducted as rent expenses.

BREAKING DOWN 'Rent Expense'

Rent paid in advance can only be deducted during the period to which it applies, so if a business paid all of its rent for 2010 and 2011 in 2010, it would only be able to deduct the 2010 portion of the rent in 2010, and would have to wait until 2011 to deduct the 2011 portion.



RELATED TERMS
  1. IRS Publication 527 - Residential ...

    A document published by the Internal Revenue Service (IRS) that ...
  2. Owners' Equivalent Rent - OER

    The amount of rent that could be paid to substitute a currently ...
  3. Real Estate Investment Group

    An organization that builds or buys a group of properties and ...
  4. Form 4797

    A tax form distributed by the Internal Revenue Service (IRS) ...
  5. Rent Ceiling

    A maximum price a landlord is allowed to charge for rent. Rent ...
  6. Deductible

    1. The amount you have to pay out-of-pocket for expenses before ...
Related Articles
  1. Taxes

    Tax Rules For Renting Out Your Vacation Home

    Here's a rundown of the specific tax rules that apply to homeowners renting out a vacation property.
  2. Investing

    The Complete Guide To Real Estate Renting

    Everything you need to know about renting property.
  3. Insurance

    Can You Make Money Renting Your Property?

    Current market conditions may make your home a tough sell. It could be time to consider renting your property until a profitable sale is possible.
  4. Insights

    What is Economic Rent?

    Economic rent typically occurs when a product, service or property is in short supply, but demand is high.
  5. Taxes

    Tax Breaks for Second-Home Owners

    Owning a second home is a great investment for a variety of reasons, but you need to know the tax implications of multi-home ownership.
  6. Managing Wealth

    Rent vs. Buy: It’s Different for Expensive Property

    For multi-million dollar homes, renting often nets out as costing less than the expenses/other financials of buying a comparable property.
  7. Investing

    8 Must-Have Numbers For Evaluating A Real Estate Investment

    These calculations can help you figure out if a particular property will be a valuable investment.
  8. Financial Advisor

    How to Reduce Real Estate Investment Taxes

    Real estate tax law is not the same for rental properties as it is for residences. These tips can help you pay less in taxes.
  9. Managing Wealth

    The Pros And Cons Of Owning Rental Property

    Owning rental property can be a rewarding and profitable experience, but it comes with some real risks.
RELATED FAQS
  1. What Home-Buying Costs Can I Deduct from Taxes?

    Except for interest, points, real estate taxes and PMI, costs to acquire a home increase the asset’s tax basis and are not ... Read Answer >>
  2. Can unearned rent be considered deferred revenue?

    Learn whether unearned rent can be considered deferred revenue. Understand what accounting practices are used to account ... Read Answer >>
Hot Definitions
  1. Straddle

    An options strategy in which the investor holds a position in both a call and put with the same strike price and expiration ...
  2. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  3. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that eventually eliminated tariffs to encourage economic activity between the United ...
  4. Agency Theory

    A supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving ...
  5. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with a maturity of less than one year. T-bills are sold in denominations ...
  6. Index

    A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is a hypothetical ...
Trading Center