Is Rent Tax Deductible?

Tax is an important revenue that is collected by any government. In a Federal or Unitary democratic system such as the United States of America, which happens to be a Federal form of democracy, the central government or the federal government collects a tax that is titled as the 'income tax', which is its primary mode of taxation. On the other hand, there are some taxes such as property taxes that are collected by local and state governments. Everyone has to pay these and many other taxes, however, there is reprieve in the form of tax deductions. Hence, when you are thinking of rent that you pay, it is just natural to think, whether a tax break is available on monthly rent.

Income tax in the United States of America is collected by Federal agency, Internal Revenue Service, which is also commonly referred to as the IRS. Internal Revenue Service has made two tax deduction provisions for the tax payers, in order to curb their tax burdens. These deductions have basically been made so that tax payers can reduce some important expenditures such as medical expenses from their income bracket, which is also known as taxable income. Taxable income is calculated by totaling the annual income of the taxpayer and subtracting deductible expenditures from it. As mentioned above, these deductions can be made in two ways, namely, standard deductions and itemized deductions. In any IRS tax deductions list, you will notice that itemized tax deductions have to be claimed by providing a legitimate proof of expenditures. Standard deductions on the other hand, are deducted on the recommendations of IRS. Standard deductions are uniform for all income tax filers. It must be noted that a tax payer can avail only one type of deduction (standard or itemized).

Coming back to the deductions of taxes, rent as an expenditure cannot be claimed as an deductible expenditure. There are however some provisions for income tax rent deductions.

Rent Tax Credit

As mentioned above, from the point of view of IRS, rent is not a deductible expenditure. However, if you fulfill some requirements, there are situations, where you shall able to claim a deduction for rent.

State Tax Deductions
The portfolio of real estate taxation in United States is usually handled by local authorities and State governments. Property taxes by state are basically decided by local governing bodies upon market prices of homes and real estates. On the basis of these surveys, states can grant rent deductions to taxpayers for state taxes, especially if the rent is above the prescribed fair rent limit. In order to claim proper deductions, you will have to consult a properly qualified and experienced tax relief attorney, who will help you to file for deductions.

Federal Tax Rent Deduction
The IRS does not make any separate provision for deduction of rent of individual tax payers. On the other hand, rent that has been paid for business purposes is easily deductible. This rent basically, includes rent that is to be paid for business purposes and can be any rent which ranges from real estate rent to lease on equipment. However, sufficient proof has to be provided while filing an income tax return. In addition to that, you will have to avail itemized tax deduction, in order to claim rent deductions.

The best way to properly file for such deductions is to consult your tax attorneys and accountants. Filing under the right provisions is an important necessity and consequences of wrongful filings are quite dire.