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Can You Write Off Rent On Taxes?
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Can You Write Off Rent On Taxes?
Getting a tax deduction for rent probably never crossed your mind if you've always worked as an employee. If you're self-employed, there are numerous purchases you can make for your business and write off from your taxable income.You might already have a healthy practice of being on the lookout for any business expenses you can deduct from your taxable income.
But what about living expenses? For example, is rent tax-deductible? Yes, if you pay 1099 employee taxes. In fact, you can write off your rent in not one but three ways, and if you know how to use them, a rent tax deduction can be the one that saves you the most each year.
Key takeaways
- The tax deduction for rent is one of the most powerful tax write-offs
- Rent isn't the only thing you can write off if you have a home office
- "Renting" a hotel can be a write-off, too
Table of contents
Working from home? Deduct your rent and utilities
It's possible you might have heard about this one already, even if you're not a freelancer because the home office deduction is a very popular rent tax deduction. One reason for that is the cost of housing. In the US, having a roof over your head is the single biggest cost for most people. So it's no wonder a rent tax deduction has such a huge impact, and is so well known.
But it's not always very well understood. Here's who can use it, how it works and some of the rules around it.
Who can qualify to write off rent from their taxes?
The home office deduction is one of the biggest perks that freelancers, self-employed individuals and independent contractors have. If you work for yourself and work from home, you qualify to write off your rent.
Back in the day, W-2 employees were allowed to deduct some of their work-related expenses if they worked from home, but the 2018 Tax Cuts and Jobs Act did away with that.
How does it work to write off rent?
Most importantly, you can't deduct all of your rent, only the portion that you use for your home office. To figure out exactly how much of your rent you can write off, there's a simple three-step formula.
Find the square footage of your home workspace
Divide the square feet you use for your home workspace by the total number of square feet in your home to get a percentage.Find the deductible portion of your rent
Multiply that number by the amount of your monthly rent to get the dollar amount you can write off from your taxes.Find your annual rent tax deduction
Multiply that dollar amount by 12 months to get your total annual tax deduction for rent.
What are the IRS regulations for writing off your rent with a home office?
Can you write off other home office deductions?
How to write off rent, method 2
If your business reaches a point where you need more office space than your home office can accommodate, congratulations! You not only have a growing business, which is the dream, but you also have another way to write off your rent. Let's say you're an Airbnb host. You used to have a home office but now you're renting out your entire apartment so you want to find another place to work.
Signing a lease on a dedicated office space outside your home means you get to deduct the entire cost of renting that space from your taxable income. Just keep in mind that the IRS won't let you also deduct part of your apartment rent for a home office. You can use a self-employment tax estimator to calculate your rent deduction. As an Airbnb host, you can also deduct the cost of groceries from your taxes as it is an ordinary and necessary expense.
There's 1 more way to write off your rent
It's not the same as signing a lease on an apartment or office space somewhere, but technically when you're on a business trip, you do "rent" a hotel or short-term lodging. And as a business travel expense, the IRS allows this to be written off from your taxes.
Along with other business travel expenses, anything you spend for accommodations at a hotel, Airbnb, Vrbo or other apartment share service is deductible, as long as it is within the IRS regulations for business travel write-offs.
These methods for turning your rent into a tax deduction are not only available to self-employed people. With all the ways to save money as a freelancer or independent contractor, it's important to keep your finances organized so you don't miss a single opportunity to write off a business expense. If your tax liability is over $1,000, use a estimated tax calculator to total your quarterly tax payments.
Use FlyFin's powerful A.I. tax engine to track all your business expenses. If you have any questions about whether your rent is tax-deductible, leave them to FlyFin's CPA team, who are available 24/7 in the app. Best wishes for watching your tax bill drop significantly with the help of A.I. and CPAs!
What’s FlyFin?
FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors. It offers a host of cutting-edge tax tools that help you quickly find deductions. You can also use tools like a home office deduction calculator.
FlyFin uses an A.I. to track all your business expenses automatically and find every possible tax deduction.
Once you have all your possible deductions in one place, our CPA team files a guaranteed 100% accurate tax return for you. It saves you a couple of thousand dollars and a ton of time on your taxes.
Download the app and have your taxes filed in minutes, saving time and more money on your taxes than last year, guaranteed.
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