If you’re a renter looking for a tax credit, there are plenty to choose from. Read on to learn more about five tax credits you can check out if you’re renting instead of paying off a home.
Tax deductions for renters are tax breaks and deductions that are available to taxpayers who rent their homes. While these deductions can reduce your tax liability if you rent your home, they typically won't save you as much as the deductions homeowners get.
- Home Office Deduction
- Renters Tax Credit
- Self-Employment Deductions
- Property Tax
- Solar Credits
1. Home Office Deduction
People who use part of their space at home as an office might be considered for a home office deduction on taxes. This location should be one of the places where you conduct work on a daily basis.
There are several ways funds can be deducted from your taxes with a home office. The amount depends on the size of the space - the bigger the office, the larger the tax credit you can receive when you rent.
A deduction with a home office also applies to the power and utilities that make the space run. The office needs to be specifically used for your business. It can’t double as a bedroom, guest room, or any other space traditionally inside a residential area.
2. Renters Tax Credit
Many states offer renter tax credits or tax deductions. The requirements for this tax credit vary by state, so it’s vital to get the details for the area you live in to see if you qualify.
In many states, the renter’s tax credit is limited to those over a certain age or with a disability. In others, you need to make under a certain amount to get this deduction on your taxes or have a rent that costs more than a portion of your yearly or monthly income.
The only thing the renter’s tax credit can do is help you make payments. If you’re interested in lowering your taxes, take a look at what your state needs from you. Then, you’ll be better prepared to fill out your forms at the end of the year.
3. Self-Employment Deductions
Self-employment is becoming more and more popular, whether it’s your main source of income or a gig on the side to bring in some extra funds. If you get a 1099 form from an employer, the government considers you self-employed. You can take advantage of this for your taxes.
If you have small business deductions that come with your day-to-day self-employed job, you can take these off of your taxes. From Wi-Fi to computers and everything in between, every little bit helps.
As a self-employed renter, there are several ways to reduce the taxes you’re responsible for at the end of the year. Ensure you explore all your options to see if there’s a way to make life easier.
4. Property Tax
While landlords typically pay property taxes, there are rare cases where tenants might be responsible for them. If you’re a renter and you pay property taxes as part of your lease, there’s a way you can use these payments to reduce the taxes you are responsible for at the end of the year. Check to see if you have to pay for property taxes as part of your lease agreement.
A federally declared natural disaster is also a reason you can deduct expenses based on property. Trouble like a tornado or a tsunami could be cause for tax reductions if your home receives damage or destruction.
The most critical thing is to check with your landlord to see what you’re responsible for paying for. You never know when it might help.
5. Solar Credit
If you rent a property and decide to install solar yourself, you could be eligible for a solar credit on your taxes. You need to occupy this space for the majority of the year to consider this one.
Solar credits can be tricky. If you live in a home that has solar but was paid for by the property owner, you can’t claim the credit. It needs to be something you added to the home yourself to lower your costs.
If you’re having issues determining who the solar belongs to, ensure you speak with your landlord to settle the trouble. A solar credit is an option that homeowners and renters alike can take advantage of for their end-of-the-year taxes.
While renters don't have as many tax deductions available to them as homeowners, some do exist. The most commonly used renters tax deduction is the home office deduction, which is especially popular for remote workers. However, before you take any renters tax deductions, it's best to confer with your accountant to ensure you're doing everything correctly.