Tax Deductions You Might Not Know You Can Take as a Renter
Property owners get all the breaks.
Literally, they get tax breaks apartment dwellers aren't eligible for. Your landlord or neighbor can deduct mortgage interest, home equity loan interest, selling and closing costs, capital gains and more. And what do you get? None of it.
But are there tax deductions that benefit you as a renter? There are actually many deductions you may not know about that renters can take advantage of each April 15th. Here are just a few for you to research.
Property tax, really?
One doesn't normally consider property taxes a deduction for a renter. After all, the landlord owns the property, right? Yes, they do. However, many lease agreements have a clause where part of your rent goes to property tax, and you may have never even noticed.
Take a look at your lease and see if there's a property tax payment you're responsible for. If so, you can deduct that, whether it's a part of your rent or you pay directly.
Freelancing and the gig economy
If you get a 1099 tax form from an employer, you're considered self-employed by the IRS. And if you're working for yourself, you may be eligible for extra deductions.
We're not talking just about the next Steve Jobs starting Apple in their garage. This could be your freelance writing business, internet retail site or your gig economy ridesharing side hustle.
Some states offer a tax credit to renters who are self-employed, with different levels of deduction. For instance:
- Renters in California who meet income requirements can apply for a $60 per-person renter's credit.
- In Maine, it's up to $300.
- For Minnesotans, it can be as high as $2,000.
- Pennsylvania offers a renter rebate program but you must be over 65, widowed or have a disability in addition to carrying a salary under $15,000 for a $500 refund.
Every state is different, so check with your local tax office.
Additionally, if you're self-employed, you can deduct health insurance premium payments without having to itemize, but what you can deduct from insurance can change in a moment as health care coverage and the future of the Affordable Care Act are debated in Washington and in statehouses.
Working from home
In our high-speed WiFi, terabyte-per-second world, it's becoming increasingly common for employees to work from home. With Skype sessions, Slack and Google Docs, there's nearly no office job you can't do from home. In fact, 39 million Americans do just that at least half the week. But did you know if you meet certain requirements, you can deduct home office expenses on your taxes?
- Your apartment has to be your primary place of business.
- Your qualification or amount of deduction is dependent on things like the size of your workspace and which method you choose to calculate your expenses. The simplified method allows a five dollar-per-square-foot deduction up to 300 square feet, while the standard method requires more calculation and permutations.
This deduction generally just applies to independent contractors, so be sure to check with your accountant to see if you qualify.
If you're a working parent and need to leave your child with a caregiver while you're at your job, you're eligible for a deduction to offset your care costs, whether your kid is with a baby sitter, at preschool or in daycare.
This isn't just a deduction for apartment dwellers, but when you're chipping into that rent, every dollar counts.
The job hunt
But what if you're not employed at all and searching for a job while living in your apartment? There might be a deduction for you as well. If you're spending money to search for a job, you can most likely get exemptions for items like the cost of resumes and postage, professional job counseling, fees paid to employment agencies, telephone or internet charges and even travel for interviews in other cities, whether you get the job or not.
You won't be eligible for these deductions if you're engaging in a new endeavor, however. These expenses, unfortunately, are only for people applying for jobs in the same industry in which they've already been working.
A higher education
And what if you're renting and still in school? Whether you're a full-time on-site college student living in off-campus housing or a continuing education student taking classes after work, there are tax deductions available to you.
If you're enrolled in courses, you can take a deduction up to $4,000 without having to itemize if your gross adjusted income is below $65,000 per person, which is most folks taking college classes. These itemized exceptions can include tuition, course fees, books for class, school supplies, activity fees and even room and board.
Additionally, with the right qualifications, you can deduct up to $2,500 worth of interest paid on student loans.
Cleaning up after a disaster
If you were a victim of a natural disaster, you may be eligible for deductions covering costs you incurred not protected by your renter's insurance as you get you and your apartment back on your feet. Be aware, this only covers natural disasters that resulted in federal aid being issued, so think more hurricanes and less your neighbor's tree crashing through your wall.
Donations from your good heart
And don't forget, deductions for charitable donations don't just cover wealthy do-gooders giving thousands to the local prep school's scholarship fund. This includes any charitable donation, whether giving a few bucks to a food bank in need or bestowing old clothes and household items to Goodwill or a thrift store. But remember, if you donate to a charity and want to be able to deduct that gift in kind, remember to ask for a receipt.
Please note: The deductions listed here are accurate at the time of publication and may have changed due to a statute expiring or a change in the laws by Congress or your local municipality. Additionally, some deductions differ state to state. Be sure to consult with a tax expert before attempting to file your taxes.