Is Rent Tax-Deductible?

1. Take the home office deduction

​Where to claim it: Box 30 of your Schedule C

The home office deduction is a common source of tax write-offs for self-employed people. It lets you deduct a portion of your rent from your taxable income, turning your apartment into a partial write-off.

It's easy to see why this deduction is so powerful. Housing costs are high — chances are good that keeping a roof over your head is your biggest expense every month. 

Let's talk about who can take advantage of the home office deduction.

Who qualifies to write off their rent?

These days, only freelancers, independent contractors, and business owners who work from home can write off their rent. Consider it one of the perks of self-employment.

Before the Tax Cuts and Jobs Act of 2018, W-2-only employees could also write off some WFH expenses. But now, you have to be self-employed to take advantage. Still, W-2 workers can take the deduction if they:

• Have both 1099 and W-2 income
• Do their 1099 work from home

What are the rules for writing off your rent?

Just being self-employed isn't enough. It's hard to make a case that an Uber driver, for example, needs a home office: They do all their work out on the road. That's why the IRS came up with some rules for taking this deduction.

The easiest way to see if you qualify is taking our home office deduction quiz. In a nutshell, though, you'll be able to claim a home office as long as you have a workstation that:

• Is regularly used for work
• Is exclusively used for work
• Is your principal place of business
  

Does a home office have to be a separate room?

No, your home office doesn't need to be a separate room. A corner in your bedroom can qualify — as long as you work there regularly, don't use it for other purposes, and treat it as the home base for your business activities.

Any of the following places could be your home office:

• ✓ Desk in the corner of your room
• ✓ Garage
• ✓ Basement
• ✓ Spare room
• ✓ Granny flat
• ✓ Attic
• ✓ Walk-in closet
• ✓ Houseboat
• ✓ Shed
• ✓ Barn space
• ✓ Studio
• ✓ Mobile home

Whatever part of your home you’re trying to claim, the key is that it’s designated just for your work.

This bit of flexibility in the tax code is a real plus for freelancers in high cost-of-living areas, who might spend enough on a tiny studio to pay for a two-bedroom apartment in a cheaper state. Luckily, a small desk in that studio would absolutely count as a home office!

How much of your rent can you deduct?

Here’s how to figure out how much of your rent you can write off:

1. Take the square footage of your workspace and divide by the square footage of your entire home.
2. Multiply this by your monthly rent. That's how much you can write off per month
3. Multiply that by the number of months you worked from home, that year, and you’ve got your full rent write-off

(The first calculation you did is to find the business-use percentage of your home. The IRS uses it to make sure you can't write off the portions of the space that are only for personal use.) 

Here's an example of this calculation at work. If my office is 100 square feet, and my home is 1,000 square feet, my business-use percentage would be 10%. Let's say my rent is $1,500 per month. That lets me deduct $150 every month. If I used my office all year round, it’s $1,800 for the entire year. 

Voila! Now you've got a healthy tax deduction for payments you were already making every month.

How do you keep track of your home office expenses?

Getting to write off your rent makes the home office deduction one of the most powerful tax breaks for small business owners. The benefits don't end there. You can also deduct part of your utilities, Wi-Fi, rental insurance premiums, cleaning costs, home security costs, and other home expenses. (For more details on what you can write off, check out the guide on our home office quiz!)

Taking advantage of this tax break does mean some documentation on your end: You'll need to know how much you're spending on all these home expenses. Seeing your taxable income go down is worth it, but the recordkeeping can be rough — especially if your electricity and heating bills fluctuate every month.

If you don't want to DIY it with a home office deduction spreadsheet, give Keeper a try. The app automatically finds recurring home office expenses for you — everything from your rent to your Wi-Fi bill.

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At tax time, you can file right through the app and claim those write-offs with a few clicks.

Using the simplified home office deduction instead

The Keeper app can take the hassle out of the home office deduction. That said, if you don't want to keep up with your expenses at all, the IRS does give you another option: the simplified home office deduction. 

This method lets you deduct $5 for every square foot of your workspace (with a maximum of 300 square feet). It'll leave you with a smaller tax deduction — just know that you're sacrificing savings for convenience. (To get a sense of how much you'd be leaving on the table, check out our guide to the simplified method vs. regular method for home office deductions.)

2. Rent a designated office space

Where to claim it: Box 20b of your Schedule C

Not every freelancer has the desire — or the room — to work out of their apartment. If you pay for an office, studio, or coworking space, the rent for that is tax-deductible.

There's one important rule to keep in mind: If you deduct the rent for an external workspace, you can't also deduct part of your apartment rent. The IRS doesn't allow double-dipping like that.

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How much of your office rent can you deduct?

Unlike with a home office, an external workspace is 100% tax-deductible. After all, you're using 100% of it for business purposes.

Can you switch off between deducting your office rent and deducting your home rent?

Yes. Say you use an external office for part of the year, then lose access to it at some point (for example, because you decided it no longer fit into your budget). If you start working from home at that point, you can deduct your office rent for the months you used it and your home rent for the months you switched to WFH.

Just remember to keep detailed records of the rent you're paying for each office — including when you paid it. That way, you’ll be safe if the IRS ever wants to question your deduction.

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3. Pay for short-term lodgings during business travel

Where to claim it: Box 24a of your Schedule C

Some freelancers and business owners travel a lot for work. If you find yourself far from home on a business trip, your travel expenses are fully deductible — and that includes what you’re spending on temporary accommodations.

You don't have to sign a lease to take this write-off. If you find a place to stay on Airbnb, Vrbo, or even Craigslist, feel free to claim the cost of your lodging.

When can you write off rent on a business trip?

The rules on work-related travel write-offs are pretty clear. If the purpose of the trip was for business, you can deduct the cost of your lodging, whether it's an Airbnb, sublet, or motel.

The IRS has some additional rules for determining whether your trip counts as work-related. You have to:

• Work regular hours
• Be at least 100 miles from home
• Be gone for less than a year

For a detailed breakdown of these requirements, check out our article on business travel deductions.

Can you write off rent as a digital nomad?

For trips that start and end on a particular day, the rules above are simple enough. But what about digital nomads like influencers and content creators, who are constantly traveling from place to place?

Since this is new territory for the IRS, the rules and guidance are less clear. However, the tone right now seems to be “tough luck.”

Digital nomads can only claim travel expenses if they have a designated “tax home” — a city they use as a home base. Unfortunately, if you don't have a tax home, you generally can't take the home office deduction either. 

If you plan on an extended stay abroad — like three to six months or longer in the same location — you can probably make a case for the home office deduction. But this is uncharted territory. Until someone ends up in Tax Court, we won’t know for sure what the IRS position on this is.

Luckily, there’s another — safer — option.

Writing off a WeWork membership abroad

More and more temporary office accommodations are becoming available to digital nomads in foreign locations. If you decide to spend a few months working abroad and sign up for a WeWork, Workbar, or other coworking space membership, you can deduct those fees as rent.

This protects you from the IRS deciding that your Airbnb was, in fact, just a vacation home. The beauty of office space companies like WeWork is that there is no way they can be construed as a personal expense. This makes it a great option for digital nomads who take their work with them.

Bonus: Renters can deduct rent from some state taxes

A handful of U.S. states allow you to deduct a part of your rent on state income taxes. It’s not much — but when you’re a freelancer, every penny counts. This is done for two reasons: Landlords pay property taxes on the homes and units that they own, and then pass those costs along to their renters, so this rent deduction is a way to defray those costs. Other states have income limits around their rent deductions as a means to help low-income residents.

You can see if your state offers rent deductions. Often, a state will require that you are a resident and taxpayer of the state, that the apartment you rent is your primary residence, and that you’re on the lease and paying rent there.

At the end of the day, there's plenty of opportunity for self-employed people to turn their rent into a tax break. As with any tax deduction, it's essential to stay organized and keep up with what you're spending on rent throughout the tax year.

Use Keeper to track your rent, and you can watch your tax bill go down without the hassle of spreadsheets or expense logs. Here’s to putting some of that rent back in your pocket!

FAQ

Is rent tax-deductible?

Rent is not often tax-deductible. However, if you’re a self-employed person who uses a rental space to conduct their work, you likely can write off rental costs on your taxes.

When you think of deducting rent, you might automatically assume this only applies to people who work from home. But the cost of renting an office, studio, or desk at a coworking spot can also count as a tax deduction.

The first rule around writing off rental costs is that you need to be self-employed. There are also rules that apply to the workspace itself:

• It needs to be regularly used for work
• It needs to be exclusively used for work 
• It needs to be your principal place of business

If you want to double-check whether or not your rent counts as a write-off, take Keeper’s home office deduction quiz.

How much of my rent is tax-deductible?

The amount of rent you can deduct depends on a couple of factors, including where the workspace is.

Let’s start with the home office deduction, which is for self-employed people who work from home.

1. Divide the square footage of your workspace by the square footage of your home
2. Multiply that by the cost of your monthly rent
3. Multiply that by the number of months you worked from home that year

The result is the amount of your home rental costs that you can deduct from your taxes.

If you rent an external workspace, like a studio, you can deduct 100% of the costs. This is because, unlike with your home, an external workspace is used 100% for business purposes.

Can I write off a home office and external workspace at the same time?

No, you can’t write off the cost of renting your home and an external workspace if you’re using both at the same time.

However, if you spend half the year working from home and the other half from a rented office, you can write off both. There just can’t be any overlap between the two.

Does my home office need to be in a separate room to count as a write-off?

No, your home office doesn’t need to be in its own room to count as a write-off. Your workspace just needs to be a dedicated spot.

For instance, the armchair where you watch reruns of your favorite show wouldn’t count because it’s not designated just for work. However, a desk in the corner of your living room dedicated to work purposes only would count.

What are common tax deductions for renters?

If you work from home, the potential tax savings don’t end with rent deductions. 

Here are other work-from-home write-offs for self-employed people:

• 🧰 Utilities
• 🌐 Internet
• 🔒 Home security
• 🏡 Rental insurance
• 🛠️ Plumbing costs
• 🧹 Cleaning costs
• ⚡ Electrical repairs

All these expenses are trackable in the Keeper app, which scans your transactions and automatically records any time you spend on an eligible tax deduction.

Additional contributions by Arielle Contreras.