When Is Your Rent a Tax Write-Off?

If there’s one thing that most people living in rental apartments can agree on, it’s that the monthly rent tends to feel like a hefty financial burden. Starting your lease at certain times of the year is one way to help lower your rent, but some renters can use their rent payments to save money in other ways. It’s possible that you qualify to write off your rent when you file your taxes, and if you do, that means you’ll be taxed on less of your annual income than you would otherwise, potentially resulting in long-term savings. Here’s how to know when your rent is a tax write-off that can keep your bank account way more flush.

Is your rent usually a tax write-off?

The simple answer is no: Your rent is not usually a tax write-off. If you, like many renters, use your apartment simply as a home – a place to store your belongings, make your own, and sleep safely and soundly every night – your rent is not a tax write-off. But that doesn’t mean your rent is never a write-off.

When is your rent a tax write-off?

Your rent may qualify as a tax write-off if you use part or all of your home for trade or business. In less jargon-heavy terms, this statement means that if you work from home and are self-employed, then whatever space you use within your apartment for your work may be counted towards your home office deduction on your tax return. This space could be as small as a desk in your bedroom or as large as an entire room that you use solely as an office or workspace and – this is key – never for recreational or non-business purposes.

How does using your rent as a tax deduction work?

According to guidelines from the IRS (Internal Revenue Service, the federal agency that oversees tax collection), you must be able to prove that you conduct business primarily from your apartment. This means that you use your apartment as a home office where you meet with your patients, clients, or customers. You must also be able to prove that whatever portion of your apartment you use as your home office is used solely for business.

Can you always write off your rent if you work from home?

Formerly, employees of a business who worked from home could write off their rent on their taxes. This is no longer the case – due to recent tax reforms, only self-employed individuals who work from a home office and plan to file a Schedule C tax form can write off their rent on their taxes.

Can you write off all your rent on your taxes?

The home office deduction does not quantify the entirety of your rent as a tax deduction. Instead, you’ll claim merely a portion of your rent as a deduction. There are two ways to determine the proper amount that you can write off.

The first of these methods is to deduct five dollars per square foot of home office space, with a maximum home office size of 300 square feet. The second – and more accurate – method involves tallying all your household expenses such as utilities and renters insurance. The IRS accepts either method, but you cannot switch your method from one to the other during the same tax year.

What else should I know about writing off my rent on my taxes?

To properly write off your rent on your taxes, you’ll need to file Schedule C on the IRS Form 1040. You’ll also complete and submit Form 8829. If you’re confused or worried about properly writing off your taxes (or worse, getting audited by the IRS), many experts recommend hiring an accountant instead of doing it yourself with tax preparation software. No matter which route you go, be honest about your expenses and home office size – that’s the fastest way to avoid an audit.

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Comments (1)

  1. Avatar Bryanah

    You can get a deduction of up to $3,000 if you rent and live in Massachusetts. No strings attached