Is a Rent Reduction Tax Deductible?

Question from a client who owns a rental property: If I have a renter who’s going through a hard time and I give them a one-month break where they don’t have to pay me any rent, can I take a deduction for that?

Answer: it’s not deductible, but you do get a tax benefit.

The one-month of rent-free living is not deductible to the owner of the property, but it’s also a month where the owner isn’t counting anything as income, either.

Example:

You own a rental property. Rent is $1,000 per month, or $12,000 per year if the property is rented all 12 months. Your renter is going through a hard time so you give them a one-month holiday where they don’t pay rent.

You don’t get a deduction for that month of free living, but it’s also a month where you don’t count any rental income. At the end of the year, your rental income will be $11,000 rather than $12,000, essentially giving you the same effect as taking a deduction.

Now I will say, this question comes up often … and people are ALWAYS unhappy with my answer.

As you can see, the end result is essentially the same as getting a deduction, but psychologically it seems like people have a hard time with the concept.