Rent Tax Deduction 2026 | Can all rents be deducted? 3 cases not eligible

In Hong Kong, where land is at a premium, high rents often take up a large portion of office workers’ salaries. Fortunately, in recent years the Government has introduced the “Domestic Rent Tax Deduction” scheme, enabling tenants to ease their financial burden when filing tax returns. Starting from the 2022/23 tax year, as long as certain conditions are met, rental expenses can be converted into a tax allowance. 10Life will explain the key concepts of rent tax deductions, the deduction cap and eligibility criteria in simple terms, and will also set out three common situations in which tax cannot be deducted, helping you save money with ease in the new tax filing season. 

• The basic tax deduction amount for each taxpayer is HK$100,000; in line with the Government’s policy to encourage childbirth, families with a child born after the end of October 2023 may enjoy a maximum tax deduction cap of HK$120,000.
• The key to the application lies in the “principal place of residence” and “stamping”. Taxpayers should not enter into private agreements simply to save stamp duty, as this could lead to losing eligibility for a substantial tax deduction.
• Owners in Hong Kong who rent properties from relatives, as well as those who already receive company housing benefits, are not eligible for the rent deduction.
• Although it is not necessary to submit the form at the time of filing tax returns, the tenancy agreement and payment records must be properly retained for at least 6 years to prepare for any spot checks by the Inland Revenue Department. 

Before exploring the specific details, let us first understand the basic logic behind this policy. So-called rent tax deduction, officially known as the “tax deduction for domestic rent”, is a regular tax concession formally introduced by the Inland Revenue Department from the 2022/23 tax year onwards. The purpose of this policy is to ease the living burden of salaries tax and personal assessment taxpayers who do not own any residential property.

In simple terms, as long as you are an employee renting a home in Hong Kong, when completing your tax return each year, you may use part of the rent paid during that tax year to directly offset your assessable income. With a lower assessable income, the tax you need to pay will naturally decrease accordingly. For members of the public who have long been renting rather than buying, this is undoubtedly excellent news, allowing everyone to retain the money they have worked hard to earn for other plans.  

After understanding the basic concept, what taxpayers are most concerned about, of course, is how much tax can actually be deducted. In general, the maximum residential rent tax deduction for each taxpayer in each assessment year is HK$100,000. In other words, even if your total annual rent is far above HK$100,000, you can only use HK$100,000 at most when calculating the tax deduction in your tax return.

It is worth noting that, to encourage childbirth, the Government has introduced an additional tax deduction in recent years. The details of this “child bonus” are as follows:

• Additional deduction cap: from the 2024/25 assessment year onwards, if a taxpayer lives with a child under the age of 18 in that assessment year, they may enjoy an additional deduction cap of HK$20,000, bringing the total to a maximum of HK$120,000.
• Age and date of birth restriction: to qualify for the bonus, the co-resident child must have been born on or after 25 October 2023. When filing tax returns, everyone should be sure to ascertain the year of birth to avoid incorrectly estimating the amount of tax deduction. 

To successfully claim the deduction, the Inland Revenue Department imposes strict requirements on the property you rent. Simply renting any premises will not automatically qualify. You must ensure that the premises meet the following three core requirements:

• “Qualifying residential accommodation”: the property you rent must be a building, or part of a building, permitted under Hong Kong law for residential use. This means that if you rent an office, an industrial building, or an unauthorised rooftop structure, it will be excluded and you cannot claim the deduction.
• “Principal residence”: the taxpayer must use the rented property as their only or principal place of residence in Hong Kong. If, for any reason, you rent two flats at the same time, you may only claim the rent deduction for the flat used as your principal residence.
• “The tenancy agreement must be stamped”: to prove that the rental payment is genuine, the taxpayer must hold a valid written tenancy agreement, and that agreement must have been properly stamped under the Stamp Duty Ordinance (Cap. 117) (commonly referred to as being “stamped”). 

Although the policy is intended to benefit the wider community of private tenants, the Inland Revenue Department will refuse your tax deduction claim in certain circumstances. To avoid disappointment later and any resulting tax liability, everyone must take note of the following three common situations in which eligibility is lost:

• “First-time buyers”: The policy is originally designed to help people without property. Therefore, if you are the legal and beneficial owner of any residential property in Hong Kong, you cannot enjoy this concession, even if you choose to rent elsewhere because the property is too far away or the flat is too small.
• “Renting from your own family”: To prevent abuse of the policy for tax avoidance, the Inland Revenue Department explicitly states that the landlord must not be a “connected person” of the taxpayer. This includes your spouse, parents, children, siblings, or a corporation controlled by you. If the landlord has one of these relationships with you, the rent cannot be deducted.
• “Receiving company rent benefits”: If your employer has already provided you with free accommodation, or has paid you a rent allowance to fully reimburse the rent you have paid, you have already received housing benefits from the company and cannot also claim a tax deduction on the same rent.

In Hong Kong, it is common for friends or couples to rent a flat together and share the rent. When multiple people share a tenancy, the allocation of the tax deduction depends on the names shown on the tenancy agreement. Below is a comparison of two common shared-tenancy scenarios and how the tax deduction is allocated: 

Many residents living in public housing have to pay rent to the Housing Department every month. So, can this expense be used to reduce salaries tax? The answer is no.

If the taxpayer or their cohabiting spouse is a tenant or authorised resident of public rental housing under the Hong Kong Housing Authority or the Hong Kong Housing Society, the rent paid for that unit will not be deductible. The reason is not difficult to understand: public housing already receives substantial government subsidies, and its rental levels are far below market rents in the private sector. As residents have already benefited from the Government’s public housing subsidy, they cannot receive a double tax advantage as well. 

The procedure for claiming rent tax deduction is actually quite straightforward. When completing your Individual Tax Return each year, you simply need to fill in the total amount of rent paid for that year in the relevant section, and there is no need to attach any supporting documents at the time of submission. However, the Inland Revenue Department has the right to conduct spot checks afterwards, so you must keep the following documents safely for six years:

• Stamped written tenancy agreement: This is the most important legal document proving the existence of the tenancy relationship, and must be retained properly.
• Rent payment records: These are used to prove that you have indeed paid the rent. It is advisable to keep bank transfer records (such as screenshots of e-Banking or Faster Payment System transactions, and bank statements), or cheque stubs.
• Proof of address: This is used to prove that the rented premises are your primary residence. Common valid proofs include water bills, electricity bills, gas bills, bank letters and bank statements.
• Retain the stamp certificate: This should be kept together with the tenancy agreement to prove that the relevant tenancy agreement has had stamp duty duly and timely paid. 

Although rent tax deductions are attractive, they come with a fixed deduction cap, and some people, such as first-time home buyers, are not eligible to benefit from them. If you wish to further increase your annual tax deduction methods and allowance, or if you simply do not qualify for the rent tax deduction, you can still take the initiative and make good use of other tax-deductible products available in the market. This not only helps to legally reduce your tax burden significantly, but also enables you to build a strong protective shield for your health and future in advance.  

Faced with the wide array of insurance products on the market, it can be time-consuming and potentially wasteful to seek quotes and research policy terms one by one on your own. If you want to plan your tax and finances smartly, you may compare the following two popular tax-deductible options objectively and transparently through the 10Life platform:  

• Voluntary Health Insurance Scheme (VHIS): It can upgrade medical protection for you and your family and help cover unexpected medical expenses, while each insured person can enjoy a tax deduction of up to HK$8,000 per year. 10Life covers a wide range of VHIS products in Hong Kong, helping you easily compare the scope of coverage and premiums for surgery and hospitalisation claims.  
• Qualifying Deferred Annuity (QDAP): This refers to a qualifying deferred annuity policy, designed to help you save for retirement while you are young. Its tax deduction cap is as high as HK$60,000 (shared with tax-deductible MPF voluntary contributions). You can use 10Life’s exclusive ratings to see at a glance the guaranteed internal rate of return and potential returns of different annuities.  

Everyone’s financial situation and protection needs are different, and popular products may not necessarily be the most suitable for you. If you would like to learn more about different insurance products, feel free to WhatsApp 37051599 to enquire with our 10Life insurance consultants.

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.