Living in California can present many business and economic opportunities. However, the state does indeed have a high cost of living and thus real estate in California is valued significantly above the national average. As such, many people who live and work in California find it impractical to purchase a home. Some people simply may not be ready to put down roots in one place because they are still developing their career and need the flexibility to move at a moment’s notice. Other people simply do not wish to invest a large sum of money into a home residence and might prefer to use their nest egg to launch an equestrian, wine-making, or another California business.

Regardless of one’s reasons for electing to rent, one may hear about mortgage and other tax deductions available to home owners and wonder if a similar or equivalent tax relief is available. The accountants of the Cook CPA Group can provide careful guidance regarding tax credits and deductions relevant for your tax and financial situation.

Certain Renters May Qualify for a California Property Tax Credit

One’s eligibility for a tax credit or deduction is solely based on the facts and circumstances applicable to their scenario. However, California is one of a few states where it is theoretically possible for a renter to claim a property tax credit.

In California, a sole tax filer who rents can claim up to $60 in tax credits. Married taxpayers who rent and file their taxes jointly can claim up to $120 in tax credits. While $60 or $120 dollars may not sound like a significant amount of money, taxpayers should recognize that this is a tax credit and not a tax deduction. A tax credit will directly reduce your tax obligation. Therefore, if you would otherwise owe $100 in taxes but claim a $60 tax credit, you will only owe $40 in taxes. By contrast, a tax deduction merely reduces your taxable income but does not directly reduce your final tax bill.

Qualifying for a Renter’s Tax Credit in CA

If you want to claim a renter’s tax credit in California, it is wise to ensure that you qualify before taking action. Individuals who improperly claim a tax credit are likely to have their request denied. However, an improper request may attract additional scrutiny and can lead to the discovery of additional tax issues or an audit. Furthermore, if the credit is mistakenly awarded, it is likely that the problem will be identified at some point and the relevant tax agency will seek a return of the money.

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The general qualifications one must have in order to properly claim this tax credit are:

  • The party claiming the credit must be a full-time resident of California meaning they lived in the state for the entire year.
  • The claimant cannot be a minor or claimed as a dependent on another tax return.
  • The taxpayer must not exceed certain gross income limits.
  • The property where the taxpayer lived had a property tax obligation.
  • This residence is the taxpayer’s principle residence and rent was paid for, at least, half of the year.

This sets forth the general qualifications that determine whether a taxpayer can claim this credit. A CPA can assess your particular facts and circumstances to determine whether you qualify for benefits.

How Does a California Taxpayer Claim this Tax Credit?

The renter’s tax credit can be claimed when one files their income tax return with the California Franchise Tax Board (FTB). If you have already filed your taxes but did not claim this credit, you can file an amended tax return.

If you have questions regarding tax planning, tax relief, or tax credits the CPAs of the Cook CPA Group can provide personalized strategic tax guidance. From our Roseville office, we can work with renters, homeowners, business owners and others. To schedule a free initial consultation, please call our law office at 916-724-1665.