How to report house used for 100% business?
As DJClayworth said, be very careful with this one!   The property is a residence, not a business location.  Given that, it is almost a certainty that the IRS is not going to let you claim 100% of the expenses for the home as a business expense, even if nobody's actually living there.   You may get away with doing this for a period of time and not run into zoning or other issues such as those DJ mentioned, but it's like begging for trouble.  You run the very real risk of being audited if you try to do what you're proposing, and rest assured, whatever you saved in taxes will disappear like smoke in the wind under an audit. That being said, there's no reason you can't call a tax service and ask a simple question, because in answering it they're going to hope to gain your business.  It'd be well worth the phone call before you land yourself in any hot water with the IRS.  I can tell you that I'd rather have a double root canal with no anesthetic than go through an audit, even when I didn't do anything wrong! (grin) Good luck!
Possible alternative: In my case, the part-time locksmithing is a small enough portion of my I come that I just submit it as hobby income, rather than trying to track it as a separate entity. Should I treat this house as a second home or a rental property on my 2015 taxes? If it was not rented out or available for rent then you could treat it as your second home. But if it was available for rent (i.e.: you started advertising, you hired a property manager, or made any other step towards renting it out), but you just didn't happen to find a tenant yet - then you cannot. So it depends on the facts and circumstances. I've read that if I treat this house as a rental property, then the renovation cost is a capital expenditure that I can claim on my taxes by depreciating it over 28 years. That is correct. 27.5 years, to be exact. I've also read that if I treat this house as a personal second home, then I cannot do that because the renovation costs are considered non-deductible personal expenses. That is not correct. In fact, in both cases the treatment is the same. Renovation costs are added to your basis. In case of rental, you get to depreciate the house. Since renovations are considered part of the house, you get to depreciate them too. In case of a personal use property, you cannot depreciate. But the renovation costs still get added to the basis. These are not expenses. But does mortgage interest get deducted against my total income or only my rental income? If it is a personal use second home - you get to deduct the mortgage interest up to a limit on your Schedule A. Depending on your other deductions, you may or may not have a tax benefit. If it is a rental - the interest is deducted from the rental income only on your Schedule E. However, there's no limit (although some may be deferred if the deduction is more than the income) if you're renting at fair market value. Any guidance would be much appreciated! Here's the guidance: if it is a rental - treat it as a rental. Otherwise - don't. It actually depends on the services provided. If you're renting through AirBnB, you're likely to provide much more services to the tenants than a traditional rental. It may raise it to a level when it is no longer a passive activity. See here, for starters: Providing substantial services.   If you provide substantial services   that are primarily for your tenant's convenience, such as regular   cleaning, changing linen, or maid service, you report your rental   income and expenses on Schedule C (Form 1040), Profit or Loss From   Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Use   Form 1065, U.S. Return of Partnership Income, if your rental activity   is a partnership (including a partnership with your spouse unless it   is a qualified joint venture). Substantial services do not include the   furnishing of heat and light, cleaning of public areas, trash   collection, etc. For information, see Publication 334, Tax Guide for   Small Business. Also, you may have to pay self-employment tax on your   rental income using Schedule SE (Form 1040), Self-Employment Tax. For   a discussion of “substantial services,” see Real Estate Rents in   Publication 334, chapter 5 This new roof should go on the 2016 LLC business return, but you probably won't be able to expense the entire roof as a repair.  A new roof is most likely a capital improvement, which means that it would need to be depreciated over many years instead of expensed all in 2016.  The depreciation period for a residential rental property is 27.5 years.  Please consider seeking a CPA or Enrolled Agent for the preparation of your LLC business return. See also: IRS Tangible Property Regulations FAQ list When you made the loan to the LLC (by paying the contractor and making a contract with the LLC), did you state an interest rate?  If not, you and your brother should correct the contract so that an interest rate is stated, then follow it.  The LLC needs to pay you interest until the loan is paid off.  You need to report the interest income on your personal return, and the LLC needs to report the interest expense in its business return. Such activity is normally referred to as bartering income. From the IRS site - You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or Form 1040, Schedule C-EZ (PDF), Net Profit from Business (Sole Proprietorship). If you failed to report this income, correct your return by filing a Form 1040X (PDF), Amended U.S. Individual Income Tax Return. Refer to Topic 308 and Amended Returns for information on filing an amended return. In Canada I think you'd do it as a % of square footage. For example: Then you can count 20% of the cost of the of renting the apartment as a business expense. I expect that conventions (i.e. that what's accepted rather than challenged by the tax authorities) may vary from country to country. If the UK is similar to Australia then you would not claim a virtual rent for the business portion but instead could claim a portion of the house expenses such as electricity use, property taxes, and yes a portion of the mortgage, and any repairs or renovations done to the work areas of the house. However, you should keep in mind that if you sell the place you may have to pay CGT on the portion you were claiming for business use. You would report it as business income on Schedule C.  You may be able to take deductions against that income as well (home office, your computer, an android device, any advertising or promotional expenses, etc.) but you'll want to consult an accountant about that. Generally you can only take those kinds of deductions if you use the space or equipment exclusively for business use (not likely if it's just a hobby).  The IRS is pretty picky about that stuff. There are several reports under the Reports>Income & Expenses menu which could be useful. Cash Flow - shows, for a particular set of accounts, where incoming and outgoing money from those accounts came from and went to. Expense BarChart/PieChart - shows top N expenses. Income Statement (also called Profit & Loss) - shows all incomes and expenses for the time period. Each of these reports have an options dialog which will let you change the period that they are reporting on and the accounts to be included in the reports. The Cash Flow report sounds particularly useful for your second scenario. It depends on the structure of your business. Are you a sole proprietor filing Schedule C on your 1040, or an S-corp, or part of a partnership? The treatment of a home office will differ depending on business entity. You should be receiving monthly P&amp;L statements at the very least. Who did you have filing taxes, doing payroll, performing audits? It seems that many restaurants and bars have a slippery cash issue where profits seem to just slide out the doors. Everyone touching cash might be skimming and if the manager is doing all the totals and reconciling the tills and filing taxes then that single point of failure is going to KILL you. Consider contracting with a property management company to lease and maintain the house until it can be sold. Rent on the property should cover the mortgage, property taxes, etc. The property management company can handle maintenance and the tenant would be responsible for utilities. lets sat If I buy a house on company's name, It will declared as expense and will deduct from profit. but I am not sure If I can rent it out as a IT LTD company. that's my questions. Buying a house is not an expense, it is a transfer of assets.  The house itself, is an asset.  So if you have $100,000 in cash, buy a house for $35,000, your total assets will remain the same ($100,000), but your asset mix will be different (instead of $100,000 in cash, you now have $65,000 in cash, and $35,000 in property). You can expense the costs associated with buying the house (e.g. taxes, interest, legal fees), but the house itself stays on the asset side of your balance sheet.  To refine the example above, if you buy the house for $35,000, and pay $5,000 in misc fees related to purchasing the house, your assets are now $95,000 ($60,000 in cash, $35,000 in house): the $5,000 reduction is from the actual fees associated with the purchase.  It is these fees that lower your profit. Being not familiar with UK rules, in Canada and the US, and likely the UK, you would then depreciate the house over its useful life.  The depreciation expense is deducted from your annual net income. If you rent out the house, what you can do is expense any maintenance fees, taxes, etc., on the house itself.  This expense will count as a negative towards the rental income, lowering your effective taxable income from the rental.  E.g. rent out a flat at $1,000/month, but your property taxes are $3,500/year, so your net income for tax purposes (i.e. your taxable income in this case) is $12,000-$3,500=$8,500. Some governments offer business information search for corporations in their jurisdiction.  The search results may show the director information for the company.  If this information is made publicly available, keep in mind there are websites that make money from indexing publicly available information to show in Google search results. I don't mean to scare you as this is a likely a slim possibility. It really depends on the privacy practices in place at the jurisdiction you're in. But do keep in mind if you're planning on doing business on the side for a few years policies may change. I would call Service Ontario (or whichever province you're incorporating in) or Corporations Canada if federally incorporating and ask them if they offer a business search service and exactly what information they make public. You might be able to reach a Privacy Officer and find out what exactly their policy is. You only need to report INCOME to the IRS. Money which you are paying to a landlord on behalf of someone else is not income.