Rent Relief Nigeria 2025

Complete Guide to 20% Tax Relief on Your Rent

15 min read

What is Rent Relief? (Quick Answer)

Rent Relief = 20% of your annual rent (Maximum: ₦500,000 per year)

That's it. Take 20% of what you pay in rent annually, and that amount gets subtracted from your income before calculating your tax.

The Simple Formula:

Step 1: Annual Rent = Monthly Rent × 12

Step 2: Rent Relief = Annual Rent × 20%
                    = Annual Rent × 0.20

Step 3: Apply the cap
        If Rent Relief ≤ ₦500,000 → Use calculated amount
        If Rent Relief > ₦500,000 → Use ₦500,000 (capped)

Step 4: Monthly Relief = Annual Relief ÷ 12

Why Did the Government Introduce This?

According to the NTA 2025 (Section 30(vi)), the government eliminated the old Consolidated Relief Allowance (CRA) that everyone used to get, and replaced it with this targeted Rent Relief for renters only.

The Government's Thinking:

Before (Old System):

Everyone got the same relief, whether they paid rent or not
No consideration for actual living costs
Homeowners got the same benefit as renters

Now (New System):

Only renters get this specific relief
Recognizes that rent is a real cost of living
Helps reduce tax burden on people who don't own homes yet

The catch? If you own your home, you cannot claim rent relief. This benefit is specifically for people paying rent.

How Rent Relief Actually Works: Real Examples

Example 1: Sarah - Entry Level Professional

Sarah's Situation:

Monthly Salary: ₦200,000
Annual Rent: ₦720,000
Monthly Rent: ₦60,000 (₦720,000 ÷ 12 months)

Step 1: Calculate Rent Relief

Annual Rent: ₦720,000

Calculate 20% of annual rent:
₦720,000 × 20% = ₦720,000 × 0.20 = ₦144,000 per year

Convert to monthly amount:
₦144,000 ÷ 12 months = ₦12,000 per month

Check against cap:
₦144,000 < ₦500,000 ✓ (Under the cap, so we use ₦144,000)

Step 2: How It Affects Her Tax

WITHOUT Rent Relief:

Annual Income:        ₦2,400,000
Rent Relief:                  ₦0
────────────────────────────────
Amount to be taxed:   ₦2,400,000

Tax Calculation:
  Bucket 1 (₦800,000 @ 0%):      ₦0
  Bucket 2 (₦1,600,000 @ 15%):   ₦240,000
────────────────────────────────
Annual Tax:           ₦240,000
Monthly Tax:          ₦20,000

Monthly Take-Home:    ₦180,000

WITH Rent Relief:

Annual Income:        ₦2,400,000
Rent Relief:          -₦144,000
────────────────────────────────
Amount to be taxed:   ₦2,256,000

Tax Calculation:
  Bucket 1 (₦800,000 @ 0%):      ₦0
  Bucket 2 (₦1,456,000 @ 15%):   ₦218,400
────────────────────────────────
Annual Tax:           ₦218,400
Monthly Tax:          ₦18,200

Monthly Take-Home:    ₦181,800

Sarah's Savings:

Monthly savings: ₦20,000 - ₦18,200 = ₦1,800 per month
Annual savings:  ₦240,000 - ₦218,400 = ₦21,600 per year

Example 2: David - Senior Professional (Hitting the Cap)

David's Situation:

Monthly Salary: ₦800,000
Annual Rent: ₦3,600,000
Monthly Rent: ₦300,000 (₦3,600,000 ÷ 12 months)

Step 1: Calculate Rent Relief

Annual Rent: ₦3,600,000

Calculate 20% of annual rent:
₦3,600,000 × 20% = ₦3,600,000 × 0.20 = ₦720,000 per year

Check against cap:
₦720,000 > ₦500,000 ✗ (OVER the cap!)

Actual relief (capped):
Relief = ₦500,000 per year
Monthly equivalent = ₦500,000 ÷ 12 = ₦41,667 per month

Important: Even though 20% of David's rent is ₦720,000, he can only claim the maximum of ₦500,000 per year.

Step 2: How It Affects His Tax

WITHOUT Rent Relief:

Annual Income:        ₦9,600,000
Rent Relief:                  ₦0
────────────────────────────────
Amount to be taxed:   ₦9,600,000

Tax Calculation:
  Bucket 1 (₦800,000 @ 0%):      ₦0
  Bucket 2 (₦2,200,000 @ 15%):   ₦330,000
  Bucket 3 (₦6,600,000 @ 18%):   ₦1,188,000
────────────────────────────────
Annual Tax:           ₦1,518,000
Monthly Tax:          ₦126,500

Monthly Take-Home:    ₦673,500

WITH Rent Relief (Capped):

Annual Income:        ₦9,600,000
Rent Relief:          -₦500,000 (capped)
────────────────────────────────
Amount to be taxed:   ₦9,100,000

Tax Calculation:
  Bucket 1 (₦800,000 @ 0%):      ₦0
  Bucket 2 (₦2,200,000 @ 15%):   ₦330,000
  Bucket 3 (₦6,100,000 @ 18%):   ₦1,098,000
────────────────────────────────
Annual Tax:           ₦1,428,000
Monthly Tax:          ₦119,000

Monthly Take-Home:    ₦681,000

David's Savings:

Monthly savings: ₦126,500 - ₦119,000 = ₦7,500 per month
Annual savings:  ₦1,518,000 - ₦1,428,000 = ₦90,000 per year

Note: Even though David pays ₦3.6 million in rent (much higher than Sarah's ₦720,000), the ₦500,000 cap means his relief is limited. However, he still saves a significant ₦90,000 per year!

The Rent Relief Cap Explained

The NTA 2025 says rent relief is capped at ₦500,000 per year (₦41,667 per month), no matter how much rent you actually pay.

What This Means for You:

Annual Rent	20% Calculation	Actual Relief	Monthly Relief
₦1,200,000	₦240,000	₦240,000	₦20,000
₦2,000,000	₦400,000	₦400,000	₦33,333
₦2,500,000	₦500,000	₦500,000	₦41,667
₦3,000,000	₦600,000	₦500,000	₦41,667
₦5,000,000	₦1,000,000	₦500,000	₦41,667

Bottom line: Once your annual rent hits ₦2.5 million (about ₦208,333/month), you've reached the maximum relief. Paying more rent won't increase your relief beyond ₦500,000/year.

How to Claim Rent Relief

According to Section 30(vi) of the NTA 2025, here's what you need to do:

Tell your employer you want to claim rent relief
Provide proof you actually pay rent (lease agreement, receipts)
Your employer will then:
- Subtract your rent relief from your salary
- Calculate tax on that lower amount
- Give you your take-home pay

This happens automatically in your payslip each month once it's set up.

Important: You must actually pay rent to claim this. If you lie about paying rent, you can be penalized!

Free Tool to Calculate Your Exact Savings

Want to know your exact tax? Use our free calculator:

TaxNaija Calculator - Just enter your monthly salary and instantly see:

✓ How much rent relief you can claim
✓ How much tax you'll pay
✓ Your exact take-home pay

No signup. No email. No payment. Just results.

Quick Calculation Cheat Sheet

Copy this and fill in YOUR numbers:

═══════════════════════════════════════════════════
   MY RENT RELIEF CALCULATION
═══════════════════════════════════════════════════

Step 1: What's my monthly rent?
        My monthly rent = ₦__________

Step 2: Convert to annual rent
        ₦__________ × 12 months = ₦__________ (annual rent)

Step 3: Calculate 20% of annual rent
        ₦__________ × 0.20 = ₦__________ (potential relief)

Step 4: Check against the cap
        Is ₦__________ more than ₦500,000?

        ☐ NO  → My relief = ₦__________ (from Step 3)
        ☐ YES → My relief = ₦500,000 (capped at maximum)

Step 5: Monthly relief amount
        ₦__________ ÷ 12 months = ₦__________ per month

═══════════════════════════════════════════════════
THIS IS HOW MUCH YOUR TAXABLE INCOME REDUCES BY!
═══════════════════════════════════════════════════

The Bottom Line (Summary)

Rent Relief puts real money back in your pocket every single month.

The 5 Key Things to Remember:

Who gets it: Only people who actually pay rent (not homeowners)
How much: 20% of your annual rent, up to ₦500,000/year maximum
How it works: Reduces your taxable income, which reduces your tax
Monthly impact: Between ₦1,000-₦7,500+ extra in your pocket each month
How to get it: Tell your employer and provide proof of rent payment

If you're paying rent in Nigeria, you're leaving money on the table every month if you're not claiming this relief. It's legal, it's automatic once set up, and it's specifically designed to help renters like you.

Stop paying more tax than you legally have to. Claim your rent relief today.