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  • Daniel Rodriguez

Can a Renter Claim Property Tax Credits or Deductions in California?

While millions of people call California home, high demand for real estate along with a high cost of living result in many Californians opting to rent an apartment, condominium, or home instead of purchasing one. Renting property rather than purchasing property can provide an individual with greater flexibility. Not only can they avoid saving for a large down payment on a property, but they can also avoid the responsibilities that come with home or property ownership. Renting can allow people greater opportunities to follow their dreams and goals by limiting living expenses.

That said, people renting property in California do still face significant costs which may include responsibility for their rental’s property taxes. As such, many people seek out any opportunities to save money and boost their household’s bottom line. Often, this involves inquiries regarding whether any property tax savings are available to taxpayers who rent rather than own property. The tax lawyers and tax professionals of NewPoint Law Group, LLP can assist with tax planning and help taxpayers legally minimize the amount of tax they pay.  To schedule a free and confidential initial consultation, please call 800-358-0305 today.

A Property Tax Credit Is Available for Some Renters in California

There is good news for renters living and paying taxes in California. That is, California is one of a handful of states that does permit renters to make a claim to reduce taxable income through a renters’ tax credit. While the amount of the credit is modest at $60 for an individual or $120 for a taxpayer with the head of household status or a married couple filing jointly, it is important to recognize that this is a tax credit and not a deduction. While a deduction merely decreases your taxable income, a tax credit directly reduces the amount of tax you owe. Therefore, this credit should not be discounted simply because of its fairly modest nature.

How Does a Taxpayer Qualify for and Claim the Renter’s Tax Credit?

Taxpayers must meet certain requirements to make a proper claim for this tax credit. Individuals who make a claim for the credit when they do not meet the following qualifications increase the likelihood that their tax return will receive additional scrutiny up to and including a tax audit. To avoid raising unnecessary red flags, a taxpayer should ensure that they meet the following criteria prior to making a claim for the tax credit:

  1. The taxpayer was a resident of California for the entire year.

  2. The taxpayer’s adjusted gross income fell below certain limits.

  3. The taxpayer’s principal residence was a rental and he or she paid rent for more than half of the year.

  4. The property had a property tax obligation.

  5. You were not a minor or claimed by a parent or other party as a dependent for more than half of the year.

  6. You or a spouse did not receive a property tax exemption for the year provided that both spouses resided in the same home.

A taxpayer must meet all of the qualifications listed above to claim the credit. The failure to satisfy any one of these criteria will make a claim for this credit improper. Improper tax claims can significantly increase the likelihood of a tax audit.

The Renter’s Tax Credit can be claimed by individuals through the California Franchise Tax Board. The FTB is the state agency that handles the state income tax. Claims for this credit should be made as part of one’s annual income tax filing.

Other Tax Saving Opportunities for Renters

Individuals who rent their property may be able to qualify for other tax saving opportunities. For one, renters can still qualify for the federal home office tax deduction provided that their property and use meets certain standards. It is important for taxpayers to be painstaking in their approach because the IRS is known to scrutinize these claims due to a high incidence of abuse.

Generally speaking, a taxpayer will need to show that they use their apartment or other rented property as their principle place of business. Furthermore, the space where the work is performed must be reserved for regular business use. The rules do not require a space to be reserved exclusively for business use, but an IRS agent will likely ensure that your business use is substantial and regular. It may still a good idea to segment off a particular space solely for business purposes in order to avoid complications or additional scrutiny during an audit.

Attorneys Provide Tax Planning Services in Folsom and Roseville

The tax planning attorneys of NewPoint Law Group, LLP are dedicated to assisting California taxpayers will both federal and state tax obligations. If you are a renter who is looking for tax savings opportunities, we can help. To schedule a free and confidential initial consultation, please call 800-358-0305 today.

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