Tax Relief for Renters
Housing costs for Illinois renters are high and a strong factor in poverty. Just over 80% of Illinois renters with incomes between $10,000 and $20,000 spent 30% or more of their income on rent versus just 4.3% of renters with income of $75,000 or more. That’s why Children’s Advocates for Change is calling for an income tax credit similar to what the state allows for most residents in owned-unit households and paying property taxes.
In his blog post, Mitch Lifson reviews the proposal which calls for enabling qualified renters to take a credit for 5% of rent paid during a tax year (similar to the 5% of property taxes paid for homeowners). The credit would apply to taxpayers at or below 200% of the Federal Poverty Level, who have lived in Illinois for at least half the year and are paying more than 30% of their income towards rent. Such a credit would also address the racial and ethnic inequities shown by the data on renters below 200% of the federal poverty level and paying more than 30% of their income on housing costs.
High housing costs can lead to housing instability. A study by Boston Medical Center found three forms of housing instability (being behind on rent, multiple moves, and a history of being homeless) were associated with adverse caregiver and child health among low-income renter households.
Twenty-three states and Washington, D.C., address similar situations with some form of a renter’s credit or deduction. Some apply the credit to just seniors or the disabled, but others provide a credit that may be based on a percentage of rent paid or the actual rent paid up to a maximum level. CAFC testified before the Illinois House Revenue and Finance Committee on the idea and is continuing to talk to legislators about the measure.
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