After all, homeowners can get some pretty incredible tax breaks – they may be able to deduct some or all of their property taxes and mortgage interest, and they can possibly exclude up to $250,000 ($500,000 if married) of gain when selling their primary residence.
But did you know that a handful of states actually offer renters like you a tax credit that can put cash back in your pocket when doing your taxes?
It’s true, and in this article, we’ll tell you what you need to know.
Who can claim the renter’s tax credit?
While the rules vary from state to state, there are a few things that remain somewhat consistent across state lines. Some typical baseline requirements include:
- You must be a resident of the state in which you rent
- You can’t be claimed as a dependent on somebody else’s return
- Your landlord paid property taxes on the property in which you rented. This may sound random, but the fact is that in nearly all states that offer some kind of tax benefit for renters, one purpose for the credit is to mitigate the effect of rising property taxes potentially being passed on from landlords to their tenants.
That being said, each state has its own unique set of rules, and we get into these specifics below.
Rental tax benefits – with a catch
Many states only offer tax benefits to renters who are older (for example, aged 65 or older) and/or are disabled. These are the states with such benefits:
- North Dakota
- Rhode Island
However, there are other states that offer a general renters tax benefit not limited by age or disability status.
Rental tax benefits for the masses
- California – In California, renters who make less than a certain amount (currently $41,641 for single filers and $83,282 for married filers) may be eligible for a tax credit of $60 or $120, respectively.
- Hawaii – Hawaii renters who make less than $30,000 per year and who paid more than $1,000 in rent for their principal residence may be able to take a tax credit.
- Indiana – Indiana renters may be eligible to deduct $3,000 in rent paid on their principal residence to reduce your taxable income rather than a credit that directly reduces your tax liability.
- Maine – Subject to certain income limitations based on household size, Maine renters may be eligible for a tax credit equal to 15 percent of the rent they paid during the year.
- Maryland – Maryland renters may be eligible for a tax credit of up to $1,000 based on certain income limits, age and household requirements.
- Massachusetts – If you paid rent in Massachusetts, you may be eligible for a deduction of 50 percent of the rent you paid during the year, up to a maximum of $3,000.
- Michigan – Renters in Michigan may qualify for the Homestead Property Tax Credit based on the difference between the property taxes you pay (or are deemed to pay as a renter) and your “total household resources.”
- Minnesota – Minnesota renters are eligible for a credit equal to a percentage of rent paid (17 percent in 2018). You’ll need to obtain a Certificate of Rent Paid from your landlord in order to claim the credit.
- New Jersey – The New Jersey benefit is interesting because it gives renters a choice as to whether they would prefer a deduction of 18 percent of rent paid or a credit of $50 on their tax return. To determine which option would put more money in your pocket, you have to do the math.
- New York – If you live in Manhattan, you may laugh at this, but New York State offers a potential $75 credit to renters if your average monthly rent is $450 or less. Your total household income must be $18,000 or less, and you must have lived in New York State for the entire year.
- Vermont – Vermont offers a rebate to renters making $47,000 or less per year.
- Washington D.C. – Washington, D.C. offers a credit of up to $750 for renters with a household income of $20,000 or less.
- Wisconsin – Wisconsin offers credit to renters with less than $24,680 in household income. Similar to Minnesota, you’ll need to obtain a rent certificate from your landlord before taking the credit.
Should you take the renters tax credit?
Our verdict is that you should typically take the government up on offers of free money. But do your research, review the information above and go get that paper!
Also, be sure to check out even more tips on how to save money this tax season.
Logan Allec is a CPA and owner of the personal finance blog Money Done Right. After spending nearly 10 years helping big businesses save money in his role as a tax adviser, he launched Money Done Right with a mission to help everybody – from college students to retirees – make more money, save more money and grow more money. Residing in the Los Angeles area with his wife Caroline, he enjoys hiking, basketball and board games.