Are There Tax Deductions for Renters?

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  • Homeowners are privy to a host of tax deductions.
  • While the same generally doesn't apply to renters, there's one benefit you may be eligible for.
  • If you're self-employed and have a home office, you may be able to claim a deduction.

Here's what you need to know if you rent a home.

The upside of renting a home rather than owning one is 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 on top of their mortgage payments, from property taxes to maintenance to repairs.

If you're a renter, you may be wondering if there are any tax breaks for you. Unfortunately, you generally cannot deduct the cost of rent on your taxes. But there's one related tax break you may be able to take advantage of.

Are you eligible for a home office deduction?

If you're self-employed and work out of your rental, you may be able to claim a deduction for a home office on your taxes. But let's be clear -- this optiononly applies to those who are self-employed. Many people have been working remotely during the pandemic, but if you're a salaried employee, you can't claim a home office, even if you didn't set foot in your company's office for all of 2021.

Now, let's talk about which renters can claim a home office. If you're self-employed, you can take a home office deduction if:

  • Your home office is your primary 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-go for you, since it's not your primary place of business. Similarly, if you usually work at home from your kitchen table, the home office deduction won't apply, since that's not the sole function of that room.

However, let's say you rent an apartment you work out of full-time. Let's also assume it's a two-bedroom apartment, and one of those rooms is used strictly as a home office. In that case, the deduction is on the table. You'll need to figure out how much space your home office takes up within your rental. From there, you can deduct a portion of your rent on 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. Plus, if you have renters insurance, you may also be eligible to deduct a portion of your premium (though that may not amount to a large deduction given that renters insurance generally isn't 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'd be looking at a deduction of $1,500. If your rent isn't very expensive, it could pay to use the simplified method on your taxes, but run both sets of numbers to be sure.

Know the tax rules

Though renting a home doesn't give you too many options when it comes to saving money on taxes, you may be able to eke out some benefits. If you're not sure what tax breaks you qualify for, 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 are claiming certain deductions for the first time.

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