No one wants to pay more in rent than they have to. Finding every possible legal deduction is the easiest way to reduce your tax burden, unless you prefer to earn less. When looking for deductions, look no further than what you pay in rent every month. While not everyone is eligible, those who are would be well advised to take advantage of this significant deduction.
Who Can Deduct Rent?
Rent is deductible if it is a business expense. This means you need to work out of your apartment to qualify for the deduction. For part of your apartment to qualify, you must have an area set aside specifically for work. This is known as a home office deduction. You may write off a portion of your rent using this deduction -- the percentage of your apartment used strictly and only for business purposes.
Not only can you deduct rent, you can also deduct utilities. Again, you can deduct the percentage of square footage the home office occupies in your home. You can also deduct expenses related to having a home office, such as Internet connections and separate phone lines. The IRS does not generally allow cell phone plans to be deducted unless the account exists solely for business.
Many people speculate that claiming a home office deduction is a red flag for an audit. While true in the 1990s, according to "Entrepreneur," this is not the case anymore. Instead, the magazine urges you to use the deduction cautiously and within the bounds of the law. The magazine further recommends having an independent contractor come in and measure your work area, as it is common for people to err too far on the side of caution and cheat themelves out of a deduction.
Other than utilities and expenses related to maintaining a home office, the IRS allows other deductions for those who work out of the home. Any condo fees or co-op memberships may be deducted, provided that you deduct only the percentage of your apartment the home office takes up. Property taxes are similarly deductible. You may also deduct the cost of moving everything related to your home office.