 Most of this information comes from the tax guide for small business for individuals who use Schedule C. Publication 334, tax year 2022, you can find on the IRS website, irs.gov, irs.gov. Looking at the income tax formula, we're focused on line one income. Remember in the first half of the income tax formula is in essence an income statement, but just an outline. Other forms and schedules flowing into these line items, one of those, the Schedule C. Having business income minus business expenses, the net business income from the Schedule C flowing into line one income of the income tax formula. When we look at page one of the Form 1040 note that the Schedule 1 is what the Schedule C flows into and then it flows from there into page one of Form 1040, line number eight. The Schedule C is a profit or loss from business having an income statement format, income minus expenses. We're focused here on the expense side of things and specifically on the rent expense side of things. All right, so rent expense. So when we think about rent expense, just remember we're not thinking generally personal rent. We're thinking the business rent has got to be ordinary and necessary for the business. You might be asking and thinking, well, hey, I do my business in my home. Well, then you have a home office type of situation and you might be renting the home or you might be owning the home if you rent the home, then yes, some of that rent might be business related in a home office kind of system. Okay, so let's get into it. Rent is any amount you pay for the use of property you do not own. So we know what rent is. It's not our stuff. We're renting it. We're just using it. We're paying for the use of it. So in general, you can deduct rent as a business expense only if the rent is for property you use in your business. So if you use whatever office building in your business or if you're renting equipment or something like that similar type of situation, then it would be a business expense you would think and you would be expensing it when you make the rent payments usually. So if you have or will receive equity in or title to the property, you cannot deduct the rent. So this is where it gets messy because if you imagine buying a piece of equipment, for example, then if you were to buy the equipment and finance the equipment, that's different than say renting the equipment. And a lot of people get this confused. And I think one of the reasons is because of the main thing that we purchase, the big thing we purchase is a home on the personal side of things. And we're so used to people saying, well, I don't really own the home. The bank owns the home. And they're referring to the fact that the bank has a loan that's secured by the home. And it's used, I think that's a joke, right? This used to be a joke. Well, the bank owns 80% of my home, but they don't really own 80% of the home. They have a loan, you owe the bank and the loan is collateral. They only have access to the home if you default on the loan. And the way to realize that is obviously the bank can't come to the kitchen table and have a discussion and say, I own 80% and therefore we need new rugs in the living room or something. We need to redo the kitchen. They don't get to vote on that kind of stuff. So renting is different than financing. So if we apply that to like a piece of equipment, then if we finance the piece of equipment, then we've got the loan that we have to put on the books to deal with. We're gonna be paying interest on the loan, which is kind of like rent on the purchasing power in order to buy the equipment. The equipment will be on the books as an asset because we couldn't expense it most likely because it's a big piece of equipment we're gonna use into the future. And then we expense it in the form of depreciation, possibly being able to have the 179 deduction or the special deduction to allow us to expense a lot or all of it upfront. If we rent it, on the other hand, then you can imagine we have a piece of equipment that we're gonna be paying rental. Now, because we don't actually own it, we're not gonna be able to put it on the books and depreciate it, but instead we're gonna be paying for it and expensing it when we make the rental payments. Usually you're gonna, as you use the property, you make the rental payments and you would be expensing it and when you make the rental payments. Now, these days, you would think those two methods would come out somewhat kind of similar in that like when you buy the property, they, you usually allocate the depreciation over the useful life. So you get the depreciation over the useful life. But these days you get that massive 179 and special depreciation. So if you buy it, then that could be a benefit to the purchaser of over-renting if you get that massive deduction upfront. Whereas if you rent it, then you're not gonna get that massive deduction upfront. If it's a normal rent, you're gonna be getting the deduction when you pay for the property because you don't actually own the property. Now, it's possible to try to set up a situation that's structured in form as though it's a rental agreement, but in actuality, it's a purchase. So for example, if they set up an agreement that basically said that you're gonna rent it for the life of the equipment or that you're gonna be able to purchase it for $1 at the end of the rental agreement or you're required to rent it for so long that it'll actually account for like the whole purchase price of the equipment, then in format, you've actually bought it and you set it up as a rental agreement for whatever reason, possibly tax reasons on either the seller or purchaser side that preferred it to be formatted as a renting agreement as opposed to a purchase kind of system. So then we'd get into these issues where, well, was it really a purchase even though it looks like a rental thing and do I have to treat it as a purchase or a rental thing?