While a small number of tax credits and deductions apply to homeowners only, there are several breaks that you can also claim if you’re a renter.
Do renters qualify for a tax deduction?
Yes, but there are some qualifications you must meet to be eligible for certain tax deductions. Some basic requirements include:
- Residential Status – You must be a resident of the state in which you are renting property.
- Tax Filing Status – You cannot be claimed as a dependent on someone else’s tax return.
- Your name must be on the lease, meaning you are legally responsible for the rental payments.
- The property owner must be paying taxes on the place you’re renting.
Is rent tax deductible?
No, you cannot deduct rent as an expense on your federal or state tax return. While the IRS allows for certain tax breaks related to renting, such as deductions for property taxes paid or the home office deduction, the actual rent you pay is not deductible. However, it’s important to check your state’s tax laws because some states may offer specific tax credits or deductions for renters.
1. Property tax
Check to see if you pay property taxes as part of your lease agreement. If you do, you can deduct that portion of your rent or any property tax you pay directly. Additionally, you can deduct property losses or damage due to a federally declared natural disaster.
2. Home office
If you use a portion of your rental home as your principal place of business, you could be eligible for the home office deduction. The amount you can deduct depends on the size of your space and whether you choose the simplified or regular method to calculate your expenses.
The simplified method lets you deduct $5 per square foot for up to 300 square feet. The regular method bases your deduction on the percentage of your home’s square footage used as office space.
3. Renter’s tax credit
Several states offer various types of renter’s credits, including tax credits, rebates, and deductions. For example, Arizona provides a tax credit based on rent or property taxes for eligible seniors, while California allows qualifying renters to receive a tax credit of up to $60 (single filers) or $120 (joint filers). In Minnesota, renters can benefit from a refundable tax credit of up to $2,640, depending on their eligibility. Other states, like Colorado and Connecticut, offer tax rebates of up to $1,000 or more for renters who meet specific criteria.
The amount of the credit is typically based on how much estimated rent landlords charge to cover the of cost property taxes. To see if your state honors this credit, contact your state’s department of revenue.
5. Education credits
If you are in college while renting your apartment or house, consider claiming the American Opportunity Credit or Lifetime Learning Credit.
- American Opportunity Credit: This credit provides a maximum benefit of $2,500 per eligible student for the first four years of higher education. To qualify, the student must be enrolled in a degree or certificate program at least half-time. The costs covered include tuition, fees, and course materials. The American Opportunity Credit is refundable, meaning you could receive a refund even if you don’t owe any tax.
- Lifetime Learning Credit: The Lifetime Learning Credit offers up to $2,000 per tax return, as opposed to per student. It is available for an unlimited number of years and can be claimed for any level of education, including undergraduate, graduate, and continuing education courses. This credit is non-refundable, which means it can reduce your tax liability to zero but won’t result in a tax refund.
When deciding between the two, consider how many years you have remaining in your education and the amount of tuition you pay. If you’re in your first four years of college, the American Opportunity Credit might be more beneficial. However, the Lifetime Learning Credit could be the better choice if you’re taking courses beyond your undergraduate years or enrolled part-time.
You can only claim one of these credits per year, so choose the one that best fits your situation. If you are a parent with a college student, you might also be able to claim these credits.
6. Student Loan Interest Deduction
College can be expensive, especially if you are also paying rent. If you are working on your degree or you’re working to pay it off, you can deduct up to $2,500 for the interest you pay on your student loans.
7. Self-employed deductions
When it comes to paying rent, every little bit helps. For lots of Americans, that means extra income from a side gig. If you receive a 1099 from an employer, the IRS considers you self-employed.
In that case, there are several small business deductions you could take if they are necessary for your job. Self-employed individuals can deduct various expenses, such as the cost of home office supplies or a portion of their rent if they use part of their home exclusively for business. Additionally, expenses like business-related travel, equipment, and professional services are also eligible for deduction, which can help to lower overall taxable income.
TaxSlayer Self-Employed finds all the breaks you deserve and makes it easy to file your return as a renter and a side hustler.
Tax deductions for renters by state
Many states offer tax breaks to ease the financial burden for renters and prevent double taxation if your landlord includes property taxes in your rent. The requirements by state are listed below:
- California: If you paid rent for at least half of the year and make less than $52,421 for single filers or married filing separately (or $104,842 for married filing jointly, head of household, or qualified widower), you may be eligible for a tax credit of $60 – $120.
- Hawaii: Hawaiian renters must earn less than $30,000 and have paid at least $1,000 in rent toward their principal residence throughout the year to qualify for a tax credit.
- Indiana: Renters can deduct up to $3,000 (or $1,500 if married filing separately) if the place you rented was your principal residence and the property was subject to property tax.
- Maine: A tax credit is subject to household size and income limitations.
- Maryland: Your eligibility for this tax credit is based on age and income threshold.
- Massachusetts: For renters whose principal residence is in-state, they can deduct up to 50% of rent paid as long as it’s under $4,000.
- Michigan: You may be eligible for a tax credit if you meet certain qualifications. Complete the Homestead Property Tax Credit Worksheet to determine your eligibility.
- Minnesota: You may be eligible for a tax refund if your household income is less than $73,270 and you meet other requirements listed on the state’s department of revenue site.
- New Jersey: The NJ property tax deduction is extended to eligible renters allowing up to 18% of rent paid to be considered property tax.
- New York: Depending on your age, income, and other requirements, you may be eligible for a credit worth up to $375 if your rent was $450 or less.
- Vermont: A rebate is available for renters who meet specific income eligibility requirements.
- Washington D.C.: Renters may be eligible for a credit worth up to $750 if their income is $20,000 or less.
Frequently asked tax deductions questions for renters
Knowing what tax deductions are available to renters can help you make the most out of your tax deductions. Here are some commonly asked questions to help you better understand tax credits and deductions for renters.
Is there a tax deduction for renters?
Renters may not receive direct deductions for rent payments, however, certain deductions and credits may be available depending on your situation, such as deductions for specific expenses related to a home office or state and local tax credits designed specifically for renters.
Can renters claim a tax deduction for rent application fees?
No, unfortunately you cannot claim a tax deduction for rental application fees. However, some landlords offer to waive application fees. Ask your prospective landlord about their rental policies.
How do you qualify for tax deductions for renters?
Each state has specific qualifications for rent deductions and credits. Check your state’s department of revenue website to see if you qualify.
For more information about tax breaks for renters and homeowners, check out our infographic below.
