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. Form 4797

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

    A maximum price a landlord is allowed to charge for rent. Rent ...
  5. Rental Real Estate Loss Allowance

    A federal tax deduction of up to $25,000 that is available to ...
  6. Deductible

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

    Tax Deductions For Rental Property Owners

    The IRS defines a real estate professional as someone who works more than half of her time in the business, and more than 750 hours per year working on her properties.
  2. Investing

    Tax Breaks For Second-Home Owners

    The tax rules on a second home vary, depending on how the property is used.
  3. Taxes

    Getting U.S. Tax Deductions On Foreign Real Estate

    If your home or second home is not in the United States, you can still get U.S. tax deductions. How many and what kind depends on whether you also rent it.
  4. Financial Advisor

    How Does Depreciation Reduce My Tax Bill?

    How the depreciation tax rule can assist real estate investors.
  5. 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.
  6. Taxes

    Tax Deductions For Rental Property Owners

    Besides creating ongoing income and capital appreciation, real estate provides deductions that can reduce the income tax on your profits.
  7. Investing

    Can't Sell Your Home? Rent It

    Find out how to profit from your property when the housing market dips.
  8. Investing

    Economics of Owning a Rental Property

    Learn how to find suitably priced rental property and the right rent level. Determine what maintenance costs to expect and what tax breaks are available.
  9. Retirement

    Generate Income For Retirement with Real Estate

    Learn whether rental income is compatible with your lifestyle, how to identify suitable properties, common pitfalls to avoid and how to secure financing.
RELATED FAQS
  1. When is mortgage insurance tax deductible on rental property?

    Discover when mortgage insurance premiums are allowed to be deducted on your taxes for rental properties and see an example ... Read Answer >>
Hot Definitions
  1. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. Price ...
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  3. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center