Renters could claim a tax credit and elect monthly payments

The proposal would let a renter claim a tax credit based on rent paid for a main home. It would cover an individual who leases their main home during the tax year. The credit would equal a percentage of rent, including certain utility costs; the listed percentages range from 8.5% to 11% for taxpayers with one or more dependents. The credit could not exceed $4,000. Rent above the local small-area fair market rent amount would not count, and no credit would be allowed if the taxpayer’s adjusted gross income for the prior year exceeded $150,000. Special rules would apply to people who live in the home for only part of the year and to married people who share a home but file separate returns. If enacted, the credit would apply to tax years beginning after December 31, 2026, and would end for tax years beginning after December 31, 2034.

The Treasury Secretary would set up monthly advance payments of the proposed credit. The payment program would cover taxpayers the Secretary determines will qualify for the renter credit and who make the required election. A taxpayer would need to qualify for the credit and elect advance payments on a timely return for the prior tax year. Monthly payments would generally be one-twelfth of the credit the Secretary expects the taxpayer to receive, or a lower amount the taxpayer elects. Advance payments would be reconciled against the credit on the tax return; excess payments could increase the taxpayer’s tax. If enacted, the Secretary would have to establish the payment program within six months after enactment. Each payment period would run from July through the following June.

The Treasury Secretary would run outreach about the credit and advance payments. The outreach would inform taxpayers about credit eligibility and advance payments, with coordination involving federal, state, local, tribal, and territorial governments. The program would include outreach, data sharing, changes to systems and forms, and efforts to help people enrolled in other programs sign up. The Secretary could work through government agencies and private groups, including free tax preparation organizations.