The Rent Relief Act of 2025 creates a new refundable tax credit (Section 36C) for rent paid on a taxpayer’s principal residence. To qualify, rent must exceed 30% of the taxpayer’s gross income for the year. The credit is calculated as a percentage of the excess rent, with the percentage determined by income level and, in high-cost areas, adjusted thresholds. The amount of the credit cannot exceed 100% of the HUD small area fair market rent (plus utilities) for the residence. There are special rules for government-subsidized housing, partial-year residents, and rent that includes utilities. The bill also introduces an advance payment option (Section 7527A) so eligible taxpayers can receive monthly portions of the credit throughout the year, with reconciliation to the final credit claim on a tax return. The effective date is for tax years beginning after December 31, 2025, with administration and regulations to be set by the IRS. In short, the bill programs a targeted tax refund to help households cover a portion of their rent, with a structure that scales by income, adjusts for local housing costs, and offers upfront monthly payments to improve cash flow during the year.
Key Points
- 1New refundable rent credit (36C): For individuals who rent their principal residence, the credit can be claimed if rent exceeds 30% of gross income for the year, and it is applied against the income tax otherwise due.
- 2How the credit is calculated: The credit amount is a percentage of the excess rent (rent above the 30% threshold). The base percentages are:
- 3- 100% for gross income not over $25,000
- 4- 75% for income over $25,000 but not over $50,000
- 5- 50% for income over $50,000 but not over $75,000
- 6- 25% for income over $75,000 but not over $100,000
- 7- 0% for income over $100,000
- 8Cap tied to local housing costs: The credit cannot consider rent amounts above 100% of the HUD small area fair market rent (plus utilities) for the residence. This limits the credit to a value aligned with local housing costs.
- 9Rent includes utilities: The definition of rent for purposes of the credit includes utilities that are part of the rent or considered in HUD’s utility allowance under Section 42(g)(2)(B)(ii).
- 10Special rule for government-subsidized housing: If the rent is subsidized under a federal, state, local, or tribal program and the resident elects this rule, the credit instead equals 1/12 of the non-subsidized rent paid during the year.
- 11Partial-year residence and special rules: The bill provides rules for taxpayers whose principal residence is only part of the year and other related administrative specifics.
- 12Advance payment of the credit: The IRS must establish a program to make monthly advance payments of the credit to eligible taxpayers (not later than six months after enactment). Taxpayers can elect to receive these advance payments, which are generally the annual credit amount divided by 12 (or another elected amount), for a 12-month period July through June. A reconciliation occurs to adjust for the actual credit claim on the tax return.
- 13Administration and implementation: The Secretary of the Treasury/IRS has authority to issue regulations and guidance to implement the new credit and the advance-payment program, including cross-references in tax code and related sections.
- 14Effective date: The amendments apply to taxable years beginning after December 31, 2025.