Can I Deduct My Rent on My Tax Return?

Rent payments are deductible in certain circumstances.

Every year, millions of people file their taxes. And every year, millions of people overpay. Overlooking deductions is easy to do, and they can make a big difference in the amount you owe. Deducting your monthly rent can result in significant tax relief, but there are some guidelines you need to follow.

Business

If you own your own business, you may deduct the rent or lease amount of the property used in the operation of your business. Also, in many cases, you may deduct rent paid for necessary equipment.

Home Business

If you are self-employed and use part of your home for work, you may deduct rent on your tax return based on the percentage of the home used for business.

How to Deduct for Home Business

Calculate the overall square footage of your home and the square footage of the room used in relation to business. The resulting percentage is the percentage of rent you can deduct.

Utilities

In addition to the amount paid for rent, you also can deduct a percentage of your utility bills. Use the same percentage that resulted from comparing your home's actual square footage with the amount used for business purposes.

Warnings

For home-business owners, a room must be used solely for work and not for personal use to qualify for deductions. For example, you cannot deduct the dining room if you eat there every night, even if you work from there as well.

If you are leasing to own, your rent is not deductible, but it may qualify as a depreciation expense.

References

• IRS.gov: Deducting Rent and Lease Expenses