= Operating a 501c3 out of an apartment / leasing 2nd room to business? =
Hi, this is my first time posting here and created a nonprofit org a few months ago. I had a question regarding if something is legal / allowed or not?
My business is online based (for now), so I spend probably 60% of the time working out of my office (in my house / apartment). I've heard you can write off expenses like that on your taxes. But can the corp lease out that office?
On a side note, I work a full time job as well. One of the companies perks is that they'll match donations 100% (up to $15k) per year for a nonprofit org. I asked around here to make sure but wanted to check if it's legal. Is there anything against me donating, and getting it donation matched, as long as I'm using it strictly towards the business? I.e. office space, server colo hosting / rental and more?
Thanks for the input.
**This should not be taken as legal advice. Please seek out an attorney to help you with your individual situation, as all situations are unique
You're raising a number of issues here.
To a certain extent, yes, it is possible to write-off some of your apartment space to run a home business (including a nonprofit organization), but probably not to the extent you've proposed above. You don't get to simply write off an entire apartment; there are square footage and time limitations. You only get to write off the portion of the apartment used for your home office and the portion of time it is used for a home office. So, for example, if you use part of your living room as a desk/home office, you would only get to write off the square footage of the portion used for the office--not the rest of the living room, bathroom, kitchen, bedroom, etc. You also don't get to write off the portion of time it is not used as a home office.
Secondly, you are asking if the nonprofit can pay costs for using your apartment as a home office. It is possible, but this very likely raises a conflict-of-interest between you and your nonprofit because you are presumably running the nonprofit and/or on its board and stand to benefit from the transaction. It is possible to navigate a conflict of interest, in which you recuse yourself from the decision to rent from yourself and have the rest of your board conduct an investigation to see if it is the best deal the organization can get--but you would do well to seek out counsel in helping you do it properly. This type of self-dealing gets quick attention from regulators, and you will likely be required to disclose it on public filings at some point. As a side note, if your nonprofit does pay for the space, I can't imagine you would then get to write off the space on your personal income taxes because it would amount to "double-dipping."
Lastly, you asked about whether your office can donate to your nonprofit. There is no problem with that per se. But all money put into a nonprofit is in trust and must be used to promote the goals of the organization.
For example, let's say my rent cost $2000. And I operate out of the business 60% of the time. So $1200 a month + internet. Would there be anything against me donating $600 and getting the other $600 matched by my full time job then putting that towards the lease? This is probably much less of a gray line once I get an actual office but anything over 150 sqft in Seattle is well over $1000, so it's tough finding a place that fits all my needs.
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