DEPARTMENT OF STATE REVENUE
Information Bulletin #38
Income Tax
November 2022
Effective Date: Upon Publication
(Replaces Bulletin #38, dated May 2008)
SUBJECT: Renter's Deduction
DISCLAIMER: Information bulletins are intended to provide nontechnical assistance to the general public. Every attempt is made to provide information that is consistent with the appropriate statutes, rules, and court decisions. Any information that is not consistent with the law, regulations, or court decisions is not binding on either the department or the taxpayer. Therefore, the information provided herein should serve only as a foundation for further investigation and study of the current law and procedures related to the subject matter covered herein.
Aside from nonsubstantive, technical changes, this bulletin has been changed to remove dates and to expand the section on limitations.
The purpose of this bulletin is to provide guidance on the renter's deduction. Indiana residents who rent their dwelling and use it as their principal place of residence are allowed a deduction from adjusted gross income if the dwelling is subject to Indiana property tax. This deduction applies to both rent paid on a single-family dwelling and any unit of a multiple-family dwelling.
The renter's deduction is limited to the actual amount of rent paid or $3,000, whichever is less. A married couple filing a joint Indiana adjusted gross income tax return for a particular taxable year may not claim a deduction of more than $3,000. A married individual filing a separate return for a particular taxable year may not claim a deduction of more than $1,500.
Example #1: Taxpayer A paid rent totaling $1,200 during the year. Because his total rent was less than the $3,000 limitation, he may deduct $1,200 on his return.
Example #2: Taxpayer B paid rent totaling $3,400 during the year. Since the total rent exceeded the $3,000 limitation, she may deduct only $3,000 on the return.
Example #3: If the taxpayer's payment includes items other than rent for the dwelling, the total payment must be segregated and the portion attributed to rent for the dwelling determined. Taxpayer C makes monthly payments of $200 for his apartment. His landlord provides the utilities which average $25 per month. Therefore, the taxpayer may use only $175 of his monthly payment as a basis for deduction. The taxpayer's total for the year would be $2,100.
This deduction shall be claimed on the Indiana individual income tax return. When claiming the renter's deduction, the taxpayer is required to indicate the landlord(s) to whom the rent was paid and the location(s) of the property.
Rent paid for mobile homes and for land use for mobile homes qualifies for this deduction provided the mobile home is the claimant's principal place of residence. Owners of mobile homes who maintain the mobile home as their principal place of residence may deduct rent paid for land use.
MEMBERS OF COOPERATIVE HOUSING
Members of cooperative-type housing projects, whereby each member shares in the ownership of the entire property, are not permitted to take the renter's deduction available on the Indiana individual income tax return. The purpose of the renter's deduction is to afford to renters, on their individual income tax returns, some property tax relief for rent paid on property subject to Indiana property tax. Since the payments made by the cooperative member to the cooperative association are based on a cost formula, it is the department's position that each cooperative member will benefit from reduced Indiana property taxes through a reduction in their proportionate share of the cost. Furthermore, payments made by the member to the cooperative association are considered investments and do not constitute rent.
If you have any questions concerning this bulletin, please contact the Tax Policy Division at taxpolicy@dor.in.gov.
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Posted: 04/26/2023 by Legislative Services Agency
DIN: 20230426-IR-045230154NRA
Composed: May 17,2024 12:21:50AM EDT
A
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