You can't normally deduct your rent from your federal income tax. But some states do allow you to deduct your home rent. If you own your home, you can deduct mortgage interest and property tax. Also, if you are self-employed and use part of your home as a home office, related costs may be deductible whether you own or rent.
Claiming Rent on Taxes
There is no personal house rent tax deduction or apartment rent tax deduction or credit available in the federal tax system. You generally cannot claim your rent on your federal tax.
Some states, including Michigan, Massachusetts and California, do allow renters to take a tax deduction or claim a rent tax credit. Not all states have such a provision. If you're not sure whether this is an option in your state, check with your state tax agency or a local tax preparer. If you use tax prep software, it may also inform you of such an opportunity.
If you have a home office, you may also be able to claim a portion of your rent on your taxes. Generally, the space needs to be used exclusively for business purposes and be your main place of business or a place where you store inventory. File Internal Revenue Service Form 8829 to claim business use of part of your home. As of 2018, you must be self-employed to claim the deduction.
You can either claim actual expenses related to your home office or claim $5 per square foot for a space up to 300 square feet.
Mortgage Interest and Property Tax
If you own your home, you can claim mortgage interest and property tax deductions on your federal income tax. Some states will allow you to deduct these costs as well. At one time there was an additional federal credit available for first-time homebuyers, but it's no longer available.
Generally, you may claim your local property taxes and then can decide whether to deduct either state and local income or sales tax. This choice may be influenced by the tax rates in the state where you live.
If you are a landlord, you can also deduct expenses relating to your rental properties. If you rent your property out part of the time, you may have to divide your expenses up and prorate based on what fraction of the year you rented out the property versus lived there yourself.
2018 Tax Law Changes
As of 2018, a number of changes are going into effect that might impact your taxes on property you own or rent.
While a home office deduction is still available for people who own their businesses, it's generally no longer available for employees. It was one of the special itemized deductions available if you exceeded 2 percent of your adjusted gross income. Tax code changes have eliminated this deduction.
Additionally, the size of a mortgage you're allowed to deduct interest on has fallen for the 2018 tax year to $750,000. If you are married and filing separately, you can deduct interest on up to $375,000 in debt. You could use the prior limits of $1 million or $500,000 if you purchased your property by 2017.
There is also a new cap of $10,000 in deductions on state and local taxes, including property tax.
2017 Tax Law Situation
As of 2017, you can deduct home office expenses that are more than 2 percent of your adjusted gross income as an employee if you itemize your deductions.
There is no cap on state and local tax deductions, known as SALT deductions, for 2017 and prior years. Home mortgage interest is deductible on loans of up to $1 million, or $500,000 if you're married and filing separately.
- Massachusetts: Deductions on Rent Paid in Massachusetts
- Michigan: Homestead Property Tax Credit Information
- NerdWallet: Home Office Tax Deductions for Small-Business Owners
- IRS: Home Office Deduction
- The Motley Fool: Say Goodbye to the Home Office Deduction -- Unless You Do This
- MarketWatch: What the New Tax Law Will Do To Your Mortgage Interest Deduction
- IRS: Publication 936, Home Mortgage Interest Deduction
- SmartAsset: Changes to State and Local Tax Deduction – Explained
- IRS: Topic Number 415 - Renting Residential and Vacation Property
- Forbes: Does The First-Time Homebuyer Buyer Tax Credit Still Exist? What Are My Options?
- CNN: Making Sense of the New Cap on State Tax Deductions
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