Getting a tax deduction for rent probably never crossed your mind if you've always worked as a W-2 employee. But if you're self-employed, many of the purchases you make for your business can be written off from your taxable income. You might already be 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? It is, 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 rental tax deduction can be the one that saves you the most each year. This guide will answer questions like when can you claim rent on your taxes, if i work from home can i deduct rent and what are some tax breaks for working from home.

Table of contents

Key takeaways...Read more

Can you write off rent if you work from home?...Read more

When can I deduct rent from my taxes?...Read more

How can you claim rent on your taxes?...Read more

How else can you deduct rent from taxes?...Read more

Is rent a tax deduction when I stay at hotels?...Read more

Tax credits for renters...Read more

Key takeaways

To lower taxes for renters, a home office or rented office space can be written off 1099 taxes
Hotel lodgings can also be a rental tax deduction for self-employed individuals.
There are also renters tax credits like the California renters credit that lower state taxes.

Can you write off rent if you work from home?

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 working from home tax benefit. One reason for that is housing costs. In the US, having a roof over your head is the single highest cost for most people. So, knowing how to deduct rent from taxes is a big deal. But it's not always very well understood. Here's who can use it, how it works and some rules around it.

When can I deduct rent from my 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 have a home office space, you can use it as a working from home tax benefit. Why isn’t rent tax deductible for W-2 employees? 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 can you claim rent on your taxes?

The most important thing to remember is that you can't actually deduct all of your rent, only the portion you use for your home office. If you want 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 monthly rent amount 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.

Suppose you rent a small house and run a woodworking business from a workshop in the basement. You can write off a portion of your rent by dividing the square footage of your home workshop by the square footage of the home and multiplying that number by the monthly rent.

Infographic entitled How To Calculate Home Office Deduction showing the calculation for one of the main tax breaks for working from home.

What are the IRS regulations for writing off your rent with a home office?

Just because you have a home office, it doesn't mean you can automatically use it as a home business tax deduction. The IRS has parameters that your home office has to fit into, or it won't be considered deductible. Here are three simple questions to give you an idea of whether your home office qualifies you to write off rent:

Is your home office regularly used for work?
Do you use this space at your home regularly to do work for your main occupation or run your business, rather than occasionally using the space for work? If yes, then you can claim rent as a work from home tax deduction.
Do you use your home office exclusively for your work?
If the space doubles as a home theater or your child's playroom, for example, you can't use it to write off your rent. It must be a part of your home used only for business purposes.
Is your home office the principal place where you do business?
Using your home office to write off your rent has to be the main place where you do your work. If you rent office space outside your home and occasionally work from your home workspace, your home office won't qualify and you can’t take the 1099 rent deduction.

Are there other tax breaks for working from home for renters?

Rent isn't the only thing you can deduct from your taxes if you have a home office. There are many other related expenses you can take. If you pay utilities like electricity or natural gas, you can deduct a percentage of them from your taxable income based on the percentage of space you use for your home office. The same goes for renter's insurance, office supplies, WiFi and certain home repair expenses. One way to find every home office tax write-off you can take advantage of is to use FlyFin. With AI finding every possible tax write-off, you won't need to save your receipts anymore or spend time keeping detailed spreadsheets.

How else can you deduct rent from taxes?

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 situation where you can deduct rent from taxes, apart from just taking it as a work from home tax write-off. 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 a 100% rent deduction on your taxes. 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 1099 tax calculator to calculate your rental tax deduction. As an Airbnb host, you can also deduct the cost of groceries from your taxes as it is an ordinary and necessary expense. Additionally, you can only deduct rent during the year you pay it. So if you’ve paid for a space in advance, you can deduct only the portion you use in the current tax year. The rest you can deduct the following year. You also cannot deduct rent if the rate is higher than the current market value. You can have a professional appraisal of your home or workspace to determine the current valuation. Paying “unreasonable rent” and claiming it as a deduction isn’t going to fly with the IRS. Sometimes, business owners may mistake property purchase payments for rent. This can get confusing, but basically, if your agreement is a conditional sales contract, those payments are not tax deductible.

Is rent a tax deduction when I stay at hotels?

It's not the same as signing a lease on an apartment or office space somewhere, but when you're on a business trip, you technically "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.

Infographic entitled Is Your Trip Work-Related listing the criteria for taking the rent deduction on your taxes.

These methods for turning your rent into a work from home deduction are generally only available to self-employed individuals. 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, you can use an estimated tax calculator to total your quarterly tax payments.

Tax credits for renters

What if we told you there was a way to get a tax deduction on rental property apart from writing off rent? Well, there is. Many US states offer renters tax credits that can be used to lower their state taxes. And while this doesn’t affect federal taxes, it’s still an option you should take advantage of. Let’s say you’re an independent contractor living in California. The state of California does offer its residents a California renters credit provided they fulfill a few requirements like:

Not being a dependent
Did not receive an exemption from property tax
Paid rent for at least 6 months in California
Earned less than $49,220 as a single filer or less than $98,440 as a joint filer

Each state has its own program, and they give it different names, which can be a bit confusing. But the general idea is to help people who are looking for tax breaks for working from home. To qualify for this state-level renter's tax credit, you usually need to meet specific criteria, just like the California renters credit. These criteria can vary from one state to another, but they often focus on factors like your income, family size and whether you're renting your primary residence. Now, about income limits - most state programs limit how much you can earn to be eligible for the credit. So, if you're in a higher tax bracket, you probably won't qualify. This is designed to direct assistance to those who really need it. To claim the credit, you'll typically have to fill out an application during tax season. The application might require some documents to prove you're eligible, like proof of income and where you live. Now, you should know that these state programs aren't one-size-fits-all. Some states offer refundable credits, while others have non-refundable credits, which reduce your tax liability but won't give you a refund check. So, make sure to research what the rules are in your state.

Infographic entitled States That Offer Renters Tax Credits that lower state taxes like the California renters credit.

Claiming rent on your taxes is a huge way to reduce your financial burden. You should always ask a tax professional to help if you feel like you need some extra help. Taking the home office tax deduction also requires keeping good records, so save everything! FlyFin’s expert CPAs offer unlimited support on the app answering questions like can I write off rent if I work from home, how can you deduct rent from taxes and when else is rent tax deductible. AI also scans your expenses to find all your work from home tax write offs.

Phone Tax Deduction

Cell phones can be a business tax deduction for self-employed individuals if it is an ordinary and necessary expense. A separate business cell phone can be fully written off.

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Can You Claim Rent On Your Taxes?