As with so many other questions regarding the tax code, the answer to the question of whether rent is deductible is "it depends." The general rule is that personal rent expenses are not normally tax-deductible -- your basic living expenses are already figured into your standard deduction. However, business expenses are generally tax-deductible. If your rent expense is a business expense, you can normally qualify for a tax deduction.
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The general rule is that personal expenses are not tax-deductible except under very limited circumstances. Money you pay in rental charges for your own personal, nonbusiness use is not tax-deductible.
Rent for Businesses
If you are paying rent on a business property, however, you may generally deduct your rent payment from your gross revenues as an ordinary business expense. The IRS does not charge income tax on gross receipts -- it taxes profits. If you own a business, you can generally deduct your business expenses, including rental payments, by filing an IRS Form 1040 individual tax return together with a Schedule C, Profit or Loss from Business.
Business Use of Residential Rental Property
If you are using part of your home or dwelling for a home office or for storage, and you are not receiving a rental payment from an employer, you may be able to deduct a percentage of your rent as an unreimbursed business expense. The percentage of your rent you can deduct is proportional to the percentage of square footage of your home you have devoted to business use. This deduction is frequently called the "home office deduction." To deduct for office usage, you must use a portion of your home strictly for business. It cannot be a mixed business and personal use office.
Claiming the Deduction
To claim a home office deduction, File a Form 8829, Expenses for Business Use of Your Home with your individual income tax return if you are self-employed. If you are not self-employed, use IRS Form 2106 or 2106EZ, Unreimbursed Employee Expenses.
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