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Can You Deduct Rent on Taxes?

 

Content provided for general information. Talk to your advisor to learn about recent updates or other rules that may apply to your situation.

Your personal rent is almost never deductible except for one key exception. Business rent is usually deductible as a business expense.

When can you deduct personal rent on your taxes?

There is no federal tax deduction for rent.

If you’re self-employed and work from home, you may be eligible to claim the home office deduction. You can usually deduct a percentage of your rent based on what percentage of your home your office takes up.

W-2 employees who work from home are not allowed to deduct home office expenses on federal taxes. Some states may still allow this deduction, so check with a tax advisor.

States also usually don’t have a tax deduction for rent. Some states do allow renters to get a tax break for property taxes similar to homeowners.

When states offer a tax break, it’s usually in the form of a tax credit if you use a rental home in that state as your primary residence. Since your landlord usually pays the property tax bill, the credit is usually for a fixed amount or based on the amount of rent you paid.

For example, you might get $500 as long as you’re a qualifying renter. Or, you might get $100 for every $1,000 in rent you paid up to $5,000.

What about short-term rentals?

Short-term rentals usually follow similar rules to the above. For example, if you go on vacation, you can’t deduct the entire cost of your hotel room even if you did some work while on vacation.

You can usually deduct extra expenses you needed for work such as buying WiFi upgrades or access to work lounges.

If you rent a separate business space, such as a temporary coworking membership, that’s usually fully deductible.

What if I have to break my lease?

There is no special tax deduction for breaking your lease. Breaking a personal lease still counts as a personal rent expense.

Under the current tax rules, any reimbursements you may receive for moving expenses, including breaking your lease, are usually taxable.

When can you deduct rent as a business expense?

Deducting rent as a business expense is usually pretty easy. If you rent a location to use for business purposes, you can usually deduct the amount of rent you paid.

The rent can be for an entire building, an office, or even a co-working membership. Other types of buildings, such as warehouses and factories, can also qualify.