A new bill hopes to provide some relief to renters who are faced with skyrocketing rental costs – by giving them a tax break.
If approved, the bill would allow renters to deduct what they pay for rent from their federal tax
Rep. Alan Grayson, a Democrat from Florida — who introduced the bill — cites the following example: Average taxpayers paying about $1,500 a month – or $18,000 a year – could possibly save $4,500 annually through the deduction if they fall in the 25 percent tax bracket.
Home owners can deduct on their taxes the interest they pay on their mortgages as well as their property taxes. For a home owner in the 25 percent tax bracket who is deducting $10,000 of interest that could add up to $2,500 in savings.
“Renters should be able to share in the tax savings,” Grayson argues. “This is a tax benefit that would go primarily to people who need it.”
But critics to the bill argue that providing tax incentives to renters would take away a strong incentive for buying a home. Also, they say many states already have their own tax credit programs for renters, such as ones geared to helping low-income or elderly residents.
Linda Couch, senior vice president for policy at the National Low Income Housing Coalition, says she doesn’t think the bill has much chance of being signed into law. But if it did, she says it could actually boost home ownership.
“It could help renters who are looking to become home owners, because it will lower their housing costs,” Couch says. “That savings could be put toward a down payment.”