Are there any tax deductions for tenants?


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Here’s what you need to know if you’re renting a home.

Key points

  • Owners benefit from numerous tax deductions.
  • Although this generally does not apply to renters, you may be entitled to a benefit.
  • If you are self-employed and have a home office, you may be able to claim a deduction.

The advantage of renting a house rather than owning one is that you write a check to your landlord every month and call it a day. Homeowners, on the other hand, are responsible for a host of expenses in addition to their mortgage payments, from property taxes to maintenance to repairs.

If you are a tenant, you may be wondering if there are any tax advantages for you. Unfortunately, you generally cannot deduct the cost of rent from your taxes. But there is a related tax break you may be able to take advantage of.

Are you eligible for a home office deduction?

If you are self-employed and work out of your rental, you may be able to claim a home office deduction on your taxes. But let’s be clear: this option alone applies to the self-employed. Many people have been working remotely during the pandemic, but if you’re a salaried employee, you don’t qualify for a home office, even if you haven’t set foot in your company’s office for the entire year 2021.

Now let’s talk about tenants who can claim a home office. If you are self-employed, you can claim a home office deduction if:

  • Your home office is your main place of business.
  • You have a dedicated space within your home that serves as your office.

So, let’s say you rent a coworking space that you use three days a week but work from your apartment twice a week. Unfortunately, that means the home office deduction is a no-no for you, because it’s not your main place of business. Likewise, if you usually work at home from your kitchen table, the home office deduction will not apply, as that is not the only function of that room.

However, let’s say you rent an apartment in which you work full time. Let’s also say it’s a two-bedroom apartment and one of those rooms is strictly used as a home office. In this case, the deduction is on the table. You will need to determine how much space your home office takes up in your tenancy. From there, you can deduct part of your rent from your taxes.

Say your apartment is 1,200 square feet and your home office takes up 300 square feet, or 25% of your living space. If your monthly rent is $1,600, you can deduct $400 for your home office. Additionally, if you have renters insurance, you can also deduct a portion of your premium (although this may not be a large deduction given that renters insurance is generally not expensive).

Another option is to use the simplified method, where you can claim $5 per square foot of office space up to 300 square feet. In this case, you would consider a deduction of $1,500. If your rent isn’t very expensive, it might be beneficial to use the simplified method for your taxes, but run both sets of numbers to be sure.

Know the tax rules

Although renting a home doesn’t give you too many options to save money on taxes, you may be able to reap some benefits. If you are unsure of what tax breaks you are entitled to, it pays to consult a professional who can help you navigate the process. This especially makes sense if you’re new to self-employment and claiming certain deductions for the first time.

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