What goes in 'Vehicles, Machinery, Equipment'?

This is for leasing business assets. Examples: leasing a copier, renting a bulldozer for a week, or leasing a business car (only if you use the Actual Expenses method for the vehicle).

Can I rent a building from myself?

Yes, but be careful. If you own the building personally and rent it to your business, you must report that rental income on Schedule E. You generally cannot create a 'tax loss' on the rental side to offset your business income due to 'Self-Rental Rules'.

Schedule C · Line 20

Rent & Lease

Paying for space or equipment? Whether it's a storefront or a photocopier, lease payments live here.

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A guide by Taxstra Tax & Accounting · CPA-led tax strategy for business owners

Your Guide

01Lines 20a and 20b 02Lease vs. Buy Strategy 03Renting From Yourself 04Audit Traps 05Frequently Asked Questions

Lines 20a and 20b

Machinery vs. real property, the split matters

Line 20 is split into two parts: 20a (Vehicles/Machinery) and 20b (Other Business Property). This line is for payments to use property you do not own. If you have title to the property, you cannot deduct rent; you must depreciate it.

Line 20a: Machinery & Equipment

Rent paid for personal property (movable assets).

Copier/Printer Leases.
Heavy Equipment rentals (e.g., bulldozers).
Vehicle Leases (warning: specific inclusion rules apply).

Line 20b: Real Property

Rent paid for real estate/physical space.

Office Buildings / Storefronts.
Storage Units.
Booth Rent (Salons/Trade Shows).

Lease vs. Buy Strategy

Should you lease that piece of equipment or buy it? The tax answer depends on your goal.

The Case for Leasing

Immediate Deduction: Rent payments are fully deductible as you pay them.
Cash Flow: Keeping cash in the business for operations rather than tying it up in assets.
No Depreciation Schedule: Simpler reporting (no Form 4562).

The Case for Buying

Section 179: You can often deduct 100% of the purchase price in Year 1 anyway (up to $1M+).
Ownership: You build equity in the asset.
Interest: If you finance the purchase, the interest is deductible on Line 16b.

Taxstra CPA Tip

If eligible for Section 179 or Bonus Depreciation, buying is often the superior tax move because you get the full deduction upfront, whereas leasing spreads the deduction over years. Run the numbers before signing a lease.

Renting From Yourself

Advanced strategy, and its limits

Many business owners buy a commercial building in their own name (or an LLC) and rent it to their operating business (the S-Corp or Schedule C). This is a great way to move money out of the business without paying payroll taxes.

Key Insight

The Self-Rental Rule: If you rent property to a business in which you materially participate, the income is non-passive (meaning you can't offset it with other passive losses), but any LOSS is still passive (meaning you can't use the loss to offset your business income).

The Fix: You must charge Fair Market Rent. Charging too much or too little can lead to IRS reclassification of income.

Audit Traps

Watch Out

Lease-to-Own Disguise

Scenario: You "lease" a truck for $1,000/mo for 36 months, then buy it for $1 at the end.

The IRS View: That's not a lease; that's a Conditional Sales Contract. You cannot deduct the payments as rent. You must capitalize the asset and depreciate it, deducting only the imputed interest portion of payments.

Watch Out

Home Office Rent on Line 20b

Scenario: You put your apartment rent on Line 20b because you have a home office.

The IRS View: Immediate correction. Home rent expenses belong on Form 8829 (Simplified or Regular method). Putting personal shelter expenses on Schedule C is a major red flag.

Frequently Asked Questions

Only if you qualify for the Home Office Deduction at the same time. BUT, you deduct that portion on Form 8829 (Line 30), NOT here on Line 20b. Putting home rent on Line 20b is a common audit trigger.

Back to Schedule C Hub · See also Line 30: Home Office

Buying Real Estate?

Moving from renting to owning your commercial space is a huge wealth builder. We can help structure the purchase for maximum tax efficiency.

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Disclaimer: This content is educational and does not constitute individualized tax advice. Tax rules change; verify all figures with a qualified CPA before filing. For personalized guidance, book a consultation.