No, you generally cannot deduct the rent paid for your personal house or apartment on your federal income tax return. Residential rent is considered a personal living expense, even when rent is one of your largest monthly costs.
However, part of the rent may be deductible when you are self-employed and use a qualifying area of the rented home for business. Business owners may also deduct rent paid for a separate office, shop or other business property. State tax rules may provide additional benefits for renters.
Is Personal Residential Rent Tax-Deductible?
Rent paid for your primary residence is generally not deductible on a federal return. This includes rent paid for:
- A house;
- An apartment;
- A condominium;
- A mobile home;
- A rented room; or
- Student housing used as your residence.
Personal, living and family expenses are generally nondeductible unless a particular tax law specifically authorizes a deduction. Simply needing the home to live near your workplace does not convert the rent into a business expense.
The rule applies whether you take the standard deduction or itemize deductions. Unlike certain expenses paid by homeowners, ordinary residential rent does not become an itemized federal deduction on Schedule A.
Can Self-Employed Renters Deduct Part of Their Rent?
Yes. A self-employed person may be able to deduct the business portion of rent through the home-office deduction.
The area must generally be used regularly and exclusively for business. It must also normally serve as the taxpayer’s principal place of business, a location where clients or customers are regularly met, or a separate structure used in connection with the business.
For example, a freelance writer who uses one room only for writing, client calls and business records may qualify. A person who occasionally works at the dining-room table while the family also uses it for meals generally will not satisfy the exclusive-use requirement.
The deduction is for the business use of the home. It does not make the entire monthly rent deductible.
How Is the Rent Deduction Calculated?
A qualifying self-employed taxpayer can generally choose between the actual-expense method and the simplified method.
Actual-Expense Method
Under the actual method, you determine the percentage of the home used for business. That percentage may be applied to indirect home expenses such as:
- Rent;
- Electricity;
- Water;
- Heating;
- Renter’s insurance;
- General repairs; and
- Certain maintenance expenses.
For example, suppose you pay $1,500 in monthly rent and use 10% of the apartment exclusively and regularly for a qualifying business. The potentially deductible rent portion would be $150 per month, subject to the home-office deduction limits.
A self-employed Schedule C filer generally calculates the actual home-office deduction on Form 8829 and reports the result on Schedule C. IRS guidance specifically instructs renters using the actual method to report rent paid through Form 8829.
Direct expenses relating only to the office may receive different treatment from indirect expenses covering the entire home. Personal portions remain nondeductible.
Simplified Method
Instead of calculating actual rent and utilities, an eligible taxpayer may use the simplified method. The deduction is generally calculated at $5 per square foot of qualifying business space, up to 300 square feet.
The maximum deduction under this method is therefore normally $1,500. You do not separately deduct part of the rent when using the simplified calculation.
The simplified method can reduce recordkeeping, but it may produce a smaller deduction than the actual-expense method for someone paying high rent.
Can Employees Deduct Rent for Working From Home?
Generally, no. An employee normally cannot claim a federal home-office deduction merely because they work remotely, even when the employer requires them to work from home.
Current IRS guidance states that taxpayers cannot claim the simplified home-office deduction for using a home as an employee. The elimination of miscellaneous itemized deductions for employee business expenses also prevents most employees from deducting their home-office rent.
This means a W-2 employee who works from a rented apartment normally cannot deduct part of the rent. The result is different when the person also operates a genuine self-employed business and uses a separate qualifying area for that business.
Employer reimbursements for home-office costs may be treated differently from deductions claimed directly by an employee.
Can You Deduct Rent Paid for a Business Property?
Yes. A sole proprietor may generally deduct rent paid for property used in a genuine trade or business.
Examples include rent paid for:
- Office space;
- A retail shop;
- A workshop;
- A warehouse;
- A salon;
- A studio; or
- A storage facility used by the business.
Schedule C instructions direct sole proprietors to report rent paid for office space and other business property on line 20b. Only the business portion is deductible when property has both business and personal uses.
The payment must genuinely be rent. Payments under an arrangement that is effectively a purchase of the property may not qualify as deductible rent.
What If You Sublet Part of Your Rented Home?
When you rent a home and then sublet a room or other portion to another person, the rent you receive is generally taxable rental income.
You may be able to allocate part of your own rent and certain related expenses to the income-producing portion of the home. The personal portion remains nondeductible. The reporting method may depend on whether the activity is a standard rental or a business that provides substantial services. Real-estate rental income and expenses are commonly reported on Schedule E, while business-type activities may be reported on Schedule C.
You should keep records showing the area rented, rental period, rent received and expenses connected with the sublet.
Can Landlords Claim Rental Expenses?
A landlord’s deduction is different from a tenant deducting personal rent.
Property owners who rent homes, apartments or rooms generally report the rent they receive as income. They may deduct eligible expenses incurred in managing, maintaining and operating the income-producing property. These can include maintenance, insurance, utilities, repairs and depreciation, subject to applicable limitations.
When a property has both personal and rental use, the expenses must generally be divided between the two uses. The personal portion is not treated as a rental expense.
Are State Renters’ Credits Available?
Although ordinary rent is not deductible on a federal return, some states provide separate renter deductions, credits or property-tax relief programmes.
Eligibility can depend on the state, income, age, disability status and the amount of rent paid. A renter should review the instructions issued by their state tax department instead of assuming the federal rule also applies to the state return.
Keep the lease, rent receipts, landlord information and proof of payment in case the state requires documentation.
What Records Should You Keep?
Anyone claiming a business-related portion of rent should retain:
- The rental agreement;
- Rent receipts or bank statements;
- The home’s total square footage;
- The square footage used for business;
- Utility and insurance bills;
- Photographs or a floor plan of the workspace; and
- Records showing regular and exclusive business use.
Business deductions must be supported by documents showing the amount paid and its connection to the business.
The Bottom Line
You cannot normally claim the rent for your personal home or apartment as a federal tax deduction.
A limited deduction may be available when you are self-employed and use part of the rented home regularly and exclusively for a qualifying business. Rent for a separate business office or commercial property may also be deductible. Employees working remotely generally cannot deduct their home rent, while state tax returns may offer separate renter benefits.
