Landlords reap the benefits of rental property tax deductions more than tenants. If you rent an apartment or house, you may be looking for a rental tax deduction. Unfortunately, renters cannot deduct rent payments from your federal return. The property owner has it better off when it comes to the tax benefits of rental property. Landlords should report all rental income and deduct all out-of-pocket rental property expenses including maintenance, insurance, tax and interest in full, according to the IRS.
It’s not all bad news, however, for all the renters out there. Some states offer a rental tax deduction and there may be other federal deductions renters can claim. Let’s take a look at some other tax deductions you may be able to take.
- Federal deductions: Don’t be overly disappointed that you can’t deduct your rent payments from your federal income 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 cost of damage of your property from fire, theft, flood or other accidents or natural disasters as long as your insurance provider does not reimburse you for the losses. We’ll cross our fingers and toes you don’t have to take that one.
- Business use of your home: Do you work from your rental home? Expenses related to your home office can be deducted from your federal and state taxes. You can deduct the amount of rent represented by the square footage of your home used for business as well as a prorated portion of utility payments like water, power, heating and gas. A few years ago, the IRS made it easier for business owners to claim this deduction with the simplified option for home office deduction. Read more about it here.
- Renter’s tax credit: Some states offer a credit for renters based on an amount that the state has determined equals the amount of rent the landlord collects to pay property taxes. To see if your state offers this credit, contact your state directly.
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