What to know about N500,000 rent relief in new tax laws

As the new tax Laws kicked off on January 1, 2026, many Nigerians had received the introduction with mixed feelings especially in terms of what they are expected to remit to the federal government as taxes. One of the key changes for the real estate sector in the tax laws is the introduction of rent […]

As the new tax Laws kicked off on January 1, 2026, many Nigerians had received the introduction with mixed feelings especially in terms of what they are expected to remit to the federal government as taxes.

One of the key changes for the real estate sector in the tax laws is the introduction of rent relief.

Rent relief was introduced to reduce the amount of tax employees pay on their income. However the relief does not apply by default, as workers may need to fill necessary information in order to claim it

In this report Daily Trust highlights how the rent relief can be claimed.

 

What is rent relief?

Rent relief is a tax deduction available to qualified and eligible employees on rent paid for residential accommodation. By reducing the portion of income subject to personal income tax, the relief can lower an individual’s overall tax liability.

This is in line with Section 30(2)(a)(vi) of the Nigeria Tax Act (NTA) 2025, the relief is calculated as 20 percent of the annual rent paid, capped at N500,000, or lower.

Checks show that the Law states that for employees to be eligible, they must accurately declare the actual rent paid and provide any additional information required by the relevant tax authority.

 

Who is qualified for rent relief?

Employees earning a salary through an employer or working in q corporate entity are eligible for rent relief provided that they have relevant information to their employer.

However, this is not applicable if the employee does not give the employer the necessary information, as there is no way the employer will know the rent paid, which automatically means that the relief cannot be applied

The law also states that for artisans and self-employed individuals, they can claim their relief directly from the relevant state tax authority.

However, for homeowners and landlords as well as others who do not pay rent, thr Law clearly states that they are not eligible

 

How to access rent relief

To get rent relief, individuals are required to declare their annual rent and submit supporting documentation as prescribed by the relevant tax authority. The process differs depending on whether the taxpayer earns through employment or operates independently.

For employees, rent relief is typically applied through the employer’s payroll once valid rent documentation, such as tenancy agreements and receipts, is submitted to HR or payroll units.

Where this information is provided early in the year, employers can get the relief into monthly PAYE deductions rather than waiting until year-end.

Olufemi Olarinde, head of the fiscal and tax reforms implementation division at the National Revenue Service (NRS), provided further insights where he xplained that everything has to be done within a particular time frame.

“If you pay your rent in January and provide your receipt, the employer can start deducting and computing your rent relief even before the year ends

“Even where relief is not fully applied during the year, employees are still required to file their annual tax returns, usually by 31 March of the following year, to claim any outstanding benefit,” he said

He added that for self-employed individuals and artisans, rent receipts or tenancy agreements must be submitted directly to the state’s internal revenue service.

Also in cases where proper records are unavailable, especially in the informal sector, state tax authorities may rely on presumptive tax regimes to estimate income and applicable reliefs. Tax returns must still be filed within state-specific deadlines for the relief to be recognised.

Further checks show that Rent relief does not apply automatically wiithout proof of rent payment, tax authorities and employers have no basis to grant the deduction.

Consequently, only rent that has been paid will be qualified, in corroboration with Employer compliance.

 

How it works

Checks by Daily Trust show that the Law allows tenants to deduct 20% of their annual rent from their taxable income, but with a maximum deduction of N500,000.

This means you can get relief on 20% of your annual rent, up to a cap of N500,000 or lower.

For instance, if your annual rent is N1,500,000, you can deduct N300,000 (20% of N1,500,000), because it’s less than the N500,000 cap. However, if your rent is N3,000,000 annually, you can only claim N500,000, as that is the maximum allowed, despite the 20% calculation being N600,000.

This cap ensures that high-income earners do not benefit disproportionately from the new rent-based deduction.

 

What the Law says

Section 30 sub Section iv of the NTA states that “20% of annual rent paid, subject to a maximum of N500,000, whichever is lower, provided that the individual accurately declares the actual amount of rent paid and other relevant information as may be prescribed by the relevant tax authority ; and (b) “total income” means total income as specified in section 28 of this Act. 31.

“Deduction shall not be allowed under this Part to any person for a year of assessment, unless claimed in writing in such form as the relevant tax authority may prescribe.

 

“The relevant tax authority may require a claimant to a deduction under section 30 (2) (a) of this Act to produce such documentary evidence as may be necessary in support of any claim and in the absence of such evidence, or where such evidence is inadequate, the relevant tax authority may refuse to allow the deduction or such part of the amount claimed,”

 

 Other highlights of the law for real estate players

Other highlights of the Law says Homebuyers and renters benefit from this law through value added tax (VAT) exemption on land and property sales, including interest in land and rent of residential properties. This has the potential of lowering construction cost and, by extension, house prices.

The Law further highlights that stamp duty exemption on lower-rent leases of less than N10 million monthly while for developers and construction firms, the good news is also in the lower costs on input materials due to VAT exemption on real estate.

Also, it highlights cost reliefs by lower with-holding-tax (WHT) rates from 2.5 percent based on rental value to 2.0 percent for local contractors, while foreign contractors pay 5 percent.

In the new tax regime,  investors  are to enjoy WHT exemption on dividend distributions from REITs which improves returns and attracts investor capital.