Effective January 1, 2026, Nigeria’s new rent relief provision will allow tenants to reduce their annual tax bills by deducting a portion of their rent from taxable income. Introduced under the Nigeria Tax Act 2025, this initiative replaces older relief allowances with a more targeted measure aimed at easing the financial strain of housing costs for residents.
Eligible taxpayers can now deduct the lower of 20% of their total annual rent or a fixed cap, typically between ₦200,000 and ₦500,000, from their taxable income, provided they present verifiable proof of rent payments such as lease agreements, rent receipts, or bank transfer records.
The relief applies to individuals paying rent for residential accommodation for themselves or their families and covers both employees under the Pay-As-You-Earn (PAYE) system and self-employed persons assessed under personal income tax regulations. However, it does not extend to rent paid on business premises or properties sublet to third parties.
Read Also 5 scenarios where foreign income becomes taxable in Nigeria
This measure is expected to offer tangible financial relief for millions of Nigerian tenants, particularly in major urban centers like Lagos and Abuja, where rent consumes a significant share of household income. Beyond easing personal financial pressure, the policy is also designed to promote greater formalisation of the rental housing sector by encouraging tenants and landlords to maintain transparent documentation of rent transactions.
By effectively reducing taxable income, the rent relief lowers the total tax payable, allowing taxpayers to retain more of their earnings. It represents a progressive step in Nigeria’s broader fiscal reforms, balancing revenue generation with social welfare. For full details and personalized guidance, individuals are advised to review the Nigeria Tax Act 2025 and consult the Federal Inland Revenue Service (FIRS) or relevant state tax authorities.
Here are Seven Ways Rent Relief Cuts Your Tax Bill
1. Direct income deduction:
Rent relief directly reduces chargeable income by allowing up to 20% of annual rent paid to be deducted, lowering the base used to calculate tax liabilities.
2. Lower tax bracket impact:
Reduced taxable income may place individuals in a lower tax bracket, decreasing their marginal tax rates and overall tax payable.
3. Annual tax savings:
With 20% rent relief, tenants paying substantial rent can save thousands of naira annually, depending on their income and rent levels. For instance, a tenant paying ₦2 million annually may deduct ₦200,000, resulting in savings at their marginal tax rate.
Read also 14 Changes made in the new tax laws to support capital market growth
4. Formalisation incentive:
The relief encourages tenants to document rent payments through formal contracts and receipts, enhancing compliance and transparency in the rental market.
5. Support for low- to middle-income earners:
The relief particularly benefits low and middle-income earners who spend a significant share of income on rent, improving post-tax disposable income.
6. Combining rent relief with existing allowances:
The relief replaces the Consolidated Relief Allowance but can be combined effectively with newly introduced tax bands, including a 0% tax band for the first ₦800,000 of taxable income, amplifying savings for lower earners.
7. Encouragement of tax filing:
Since claiming rent relief requires filing personal income tax returns with rent evidence, it promotes broader taxpayer participation and compliance within the economy.
