Federal and state tax laws limit tax deductions for renters.
When you own rental property, both federal and state governments provide a number of tax deductions that can increase profit potential. Allowable deductions include direct and indirect costs such as mortgage interest, depreciation, insurance premiums and repairs. Because as a tenant you do not normally incur these costs, federal and state tax laws limit your option to claim rent on income taxes.
State Income Tax
Your chance of claiming rent on state income taxes is far greater than with federal taxes. Although not every state offers a direct rent credit, those that do generally offer a deduction for a portion of the rent you pay. For example, in Indiana, as of 2012, you can deduct up to $3,000 of annual rent, not including any utilities your landlord pays on your behalf. In Wisconsin, whether you can claim rent depends on meeting specific requirements, one of which concerns your annual income. Wisconsin Homestead Credit 2012 regulations state that your income must be less than $24,680. In addition, your landlord must provide a rent certificate for you to include with your tax return showing the amount of annual rent and whether you are responsible for payment of utilities. The maximum amount you can claim is $1,160.
Property/Real Estate Tax Deductions
The federal government does not provide a direct tax deduction for renters. However, if the terms of your rental agreement or lease state that you are responsible for paying all or part of the property or real estate taxes on a rental unit, the Internal Revenue Service allows you to deduct this cost. To claim the deduction, you must provide a statement from your landlord showing the amount of tax for which you are responsible. In addition, you must file your taxes using Schedule A of Form 1040.
Casualty Deductions
If you rent a home and incur losses because of a natural disaster or theft, the IRS allows you to deduct the loss. The amount you can claim, according to IRS 2012 regulations, is the net amount after subtracting any salvage value and insurance reimbursement. Just as with claiming a property tax deduction, you must file taxes using Schedule A of Form 1040 as well as complete Form 4684 to report casualty losses.
Tips
Tax laws and regulations can be confusing, Before deciding whether you qualify for any federal deductions, consider consulting with a tax professional. To find out if your state offers a tax deduction for renters, ask a tax professional or contact the department of revenue for the state in which you live.
Tags: your landlord, 2012 regulations, allows deduct, amount claim, annual rent
