“How Property Managers Should Understand The Renter’s Credit”

What does “renter’s credit” mean for property managers and tenants?

Many property managers and landlords are confused with the term “renter’s credit” and often do not use the term correctly.

This misunderstanding often leads to its misuse, causing misunderstandings between parties. This may also result in a tenant’s dissatisfaction due to the incomprehensive explanation by property managers about refundable tax credit…. Resulting in possible legal action against them.

To avoid the misinterpretations for this term, a property manager should have a better understanding of what “renter’s credit” is and what it encompasses.

A Guide to Better Understand a Renters Credit

There are several definitions for a “renter’s credit” depending on the state where the credit is being used. Several states have their own qualifications and requirements before renter’s credit can be acquired. The property manager and landlord of a rental property should check the guidelines in their area before discussing anything to do with “renter’s credit” with their tenants.

But what is renter’s credit and when are tenants eligible for it?

What Is a Renter’s Credit

Renter’s credit is a refundable tax credit which is created to give property tax relief to low-income homeowners (who pay property tax directly) and low-income renters (who pay property tax indirectly, through their landlords). In some areas, renter’s credit is also known as Real Property Tax Credit.

When Are Renters Eligible for the Renter’s Credit

A tenant is eligible for the renter’s credit if their total household income is less than $18,000 and includes some kind of non-taxable income. If one of the members of the household has an income that may not be on the tax return, the tenant can also be eligible for the property tax relief.

A tenant is also eligible if they pay rent to a landlord who is not totally exempt from property taxes. The total amount of rent serves as a basis for considering the eligibility for a tax relief. If the tenant’s rent is less than $450 per month without the extra amount for utilities, then they can be considered for a refundable tax credit.

However, before giving renter’s credit to all the tenants who passed the qualifications, keep in mind that they must be a resident of the state where they’ll be claiming the credit. Lastly, make sure that the tenant has paid rent for at least half of the current year.

States That Offer a Renters Credit

Some of the states allow tenants to apply for refunds and property tax credits for their rent. If the rental property business is located in these areas, then the property manager may give refunds or deductions to a tenant’s rent.

  • California: A tenant who passed the income and other requirements can apply for a renter’s credit of $60 (if filing separately) or $120 (if filing jointly).
  • New Jersey: Tenants who pay property taxes indirectly through their rent are eligible for a renter’s credit that is depending on their income, the amount of property taxes or rent paid and filing status.
  • Maine: Tenants are eligible for credits of up to $300.
  • Minnesota: A tenant could apply for a refund of up to $2,030 but the amount will still highly depend on their income and property taxes.
  • Maryland: Tenants who passed certain requirements can apply for credit of up to $750. However, applications must be submitted by September 1 in the year in which the credit will apply.
  • Indiana: Landlords and property manager can give deduction up to $3,000 worth of rent payments to their tenants under the state’s Renter’s Deduction stipulation.
  • Pennsylvania: Tenants who are over 65, widowed or disabled, and make less than $15,000 are eligible for a $500 or $650 rent payment refund.

What Is a Nonrefundable Renter’s Credit

A nonrefundable renter’s credit is applicable for the state of California only. The nonrefundable renter’s credit is made specifically for renters who have a personal tax liability. A tenant can use this credit if they are paying a rent and have personal income tax credit.

Qualifications to Be Entitled to Nonrefundable Renters Credit

In order for a tenant to qualify for a nonrefundable renter’s credit, s/he must be able to meet the following requirements:

  • A tenant must be a California resident for the entire year.
  • A tenant must have a California Adjusted Gross Income of $39,062 or less if their filing status is single or married/RDP filing separately. If the tenant is married/RDP filing jointly, head of household or a qualified widow, the required AGI is $78,125 or less.
  • The rented property should not be exempted from California property tax and the tenant does not live with another person for more than half the year.
  • The tenant must not a minor living with and under the care of a parent, foster parent, or legal guardian.
  • The tenant and their spouse/RDP was not granted a homeowner’s property tax exemption during the tax year.
    • However, credit may still be acquired if the tenant maintained a separate residence for the entire year when spouse/RDP claimed a homeowner’s exemption.

Final Thoughts On A Guide To Better Understand A Renters Credit

In this blog post, we talked about the renter’s credit.  A renter’s credit, or Real Property Tax Credit, is a refundable tax credit which is created to give property tax relief to homeowners with low salaries.

To become eligible for the tax relief, the total amount of income of the tenant’s household must be less than $18,000 and with a base rent of below $450. However, the tenant must be a resident of the state where they’ll be claiming the credit before they could file for a deduction.

The renter’s credit is allowed in several states such as California, New Jersey, Maine, Minnesota, Maryland, Indiana, and Pennsylvania. In California, a nonrefundable renter’s credit is given to the tenants to gain a personal tax liability to reduce their tax.

If you have further questions you want to ask about the renter’s credit, you can leave them in the comments.





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2. A Property Manager’s Guide To Understanding The Generic Rental Agreement
3. Rental Laws That Property Managers Should Know

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ARTICLE: How Property Managers Should Understand The Renter’s Credit

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