tax deductions

Tax Deductions for Renters

tax deductionsIt seems like homeowners get all the tax write-offs. For some, this is one of the major factors that encourage renters to buy. Well, we have scoured the IRS guidelines and have found some tax deductions for renters. While not all of these tax deductions will apply to each tenant, perhaps you will be able to use one of these renter related tax deductions.

Property Tax Payments

Uncle Sam will not allow you to deduct a part of your rent like they do for the interest on a mortgage, but if your lease agreement specifically states that you are paying the property taxes, you can deduct those payments on your federal return. Some states will offer a renters tax credit which sort of represents the amount the landlord collects to pay the property taxes. These are generally aimed at low income or the elderly.

Personal Property Damage

If the property that you were renting was damaged because of fire, arson, theft, flooding or another type of accident, you can deduct the cost of the damage to your personal property. Your landlord gets the write-off on the damage to the unit or house, but you can count the cost of the damage to your personal property.

Home Office

Do you work from home? Do you run a business out of your house? Did you know that you can deduct a portion of your rent, utilities, phone, and internet expenses? The home office deduction is pretty complicated, but it is worth the effort. If you use software (like TurboTax) to prepare your tax return, they will walk you through it. But to give you a general idea, here’s a shot at a simple explanation.

First, the home office is only used for business stuff – you don’t pay your credit card bill at that desk and your kids don’t do their homework there either. If so, then you can deduct a prorated share of your expenses out of your taxes. For example, if the office is 10’ x 10’ and you rent an 800 square foot apartment, then your office represents 12.5% of the total rentable area. Your home office deduction would be 12.5% of your rent, utilities, phone (if you don’t have a dedicated work line) and internet (if you use it for business too).

The IRS has created a more simplified deduction that allows you to deduct $5 per square foot and is capped at an annual deduction of $1,500. This can make getting a rent related tax break much easier.

Financial Planning

Did you know that you can deduct your tax planning and investment expenses as long as they exceed 2% of your adjusted gross income? That would include calls to your broker and subscriptions to financial publications. So if you are paying for advice on how to plan for the future, make sure you grab the tax write off.

Moving Expenses

If you moved from more than 50 miles away, you can deduct all of your moving expenses including storage, transportation, insurance, lodging etc. Plus, there is no cap on the deduction – so you get to claim it all! Welcome to town.

While people who own homes may get the lion’s share of housing related tax deductions, there are some tax deductions out there for renters. Of course, we encourage you to consult a tax advisor to see what is needed to qualify for these deductions. Also, do not forget to claim any other itemized deductions such as donations and self-employment expenses.

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