What exactly is rent relief?
Rent relief lets renters subtract part of their rent from taxable income before PAYE is calculated. It’s automatic once your employer applies it.
Rent Relief = 20% of your annual rent (capped at ₦500,000 per year).
Whatever number you land on is removed from your taxable income. Lower taxable income means lower tax.
How to calculate it
1. Annual rent = Monthly rent × 12
2. Relief = Annual rent × 20%
3. Cap check = Relief cannot exceed ₦500,000
4. Monthly view = Relief ÷ 12Why Nigeria introduced rent relief
Section 30(vi) of the NTA 2025 scrapped the old Consolidated Relief Allowance and replaced it with a targeted perk for renters.
Before (old CRA)
- Everyone enjoyed the same allowance—even people without rent expenses.
- Did not reflect real housing costs.
- Homeowners benefited as much as renters.
Now (rent relief)
- Only renters qualify, so the benefit goes to people paying rent.
- Links relief directly to a major cost of living.
- Lightens the tax load for people who haven’t bought a home yet.
Heads up: Homeowners aren’t eligible—this relief is strictly for tenants with proof of rent payments.
Example: Sarah’s rent reduces her tax
Sarah earns ₦200,000 each month and pays ₦60,000 in rent. Here’s what rent relief does for her.
Annual salary: ₦2,400,000 · Annual rent: ₦720,000
Step-by-step
Annual rent: ₦720,000
Relief (20%): ₦720,000 × 0.20 = ₦144,000
Cap check: ₦144,000 ≤ ₦500,000 → use ₦144,000
Monthly relief: ₦144,000 ÷ 12 = ₦12,000Without rent relief
Taxable income: ₦2,400,000
Annual tax: ₦240,000
Monthly tax: ₦20,000
Take-home: ₦180,000With rent relief
Taxable income: ₦2,256,000
Annual tax: ₦218,400
Monthly tax: ₦18,200
Take-home: ₦181,800Sarah saves ₦1,800 every month (₦21,600 per year) just by claiming rent relief.
Example: David hits the ₦500k cap
David earns ₦800,000 monthly and pays ₦300,000 in rent. Because his rent is high, the cap kicks in.
Annual salary: ₦9,600,000 · Annual rent: ₦3,600,000
Step-by-step
Annual rent: ₦3,600,000
Relief (20%): ₦3,600,000 × 0.20 = ₦720,000
Cap check: ₦720,000 > ₦500,000 → use ₦500,000
Monthly relief: ₦500,000 ÷ 12 ≈ ₦41,667Even though David’s 20% calculation is ₦720,000, he can only claim the legal maximum of ₦500,000 per year.
Without rent relief
Taxable income: ₦9,600,000
Annual tax: ₦1,518,000
Monthly tax: ₦126,500
Take-home: ₦673,500With rent relief (capped)
Taxable income: ₦9,100,000
Annual tax: ₦1,428,000
Monthly tax: ₦119,000
Take-home: ₦681,000David pockets an extra ₦7,500 per month (₦90,000 yearly) despite the cap.
Understanding the ₦500k cap
The law caps relief at ₦500,000 per year (roughly ₦41,667 monthly) no matter how expensive your rent gets.
| 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 monthly) you’ve maxed out the relief.
How to apply rent relief through payroll
Tell HR once and rent relief reflects automatically in your payslip going forward.
- Notify your employer that you’re claiming rent relief.
- Show proof of rent payments (lease, receipts, bank transfers).
- Employer adjusts payroll by subtracting the relief from taxable income before computing PAYE.
Reminder: You must actually pay rent. False claims can trigger penalties and back taxes.
Use the free TaxNaija calculator
Plug in your salary and rent to see your full PAYE breakdown—rent relief included.
- ✓ See the tax impact of rent relief instantly.
- ✓ Compare monthly and annual take-home pay.
- ✓ Factor in pension and other deductions.
No email, no sign-up—just numbers you can trust.
Rent relief keeps more cash in your pocket
Claiming rent relief can add ₦1,000–₦7,500+ to your take-home pay every month.
- Eligibility: You must be a renter with proof of payment.
- Amount: 20% of annual rent, up to ₦500,000.
- Mechanism: Relief reduces taxable income before PAYE.
- Setup: A simple conversation with HR and supporting documents.
- Benefit: Immediate monthly savings—completely legal and designed for you.
If you’re paying rent in Nigeria and not claiming this, you’re overpaying tax. Fix it today.
Ready to calculate your tax?
Use the free TaxNaija calculator to break down your salary, see every bracket in seconds, and understand your true take-home pay.
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