Nigeria Unveils N500,000 Rent-Based Tax Relief For Tenants In 2025.
The Nigerian government has introduced a significant reform to its personal income tax system, replacing the longstanding consolidated and personal relief allowances with a new rent-based deduction capped at N500,000 annually. This change, enshrined in the Nigeria Tax Act signed into law by President Bola Tinubu on 26 June 2025, aims to ease the financial burden on tenants, particularly low-income earners, and is set to take effect from 1 January 2026. The initiative, to be implemented by the newly established Nigeria Revenue Service (NRS), marks a shift towards a more equitable tax structure for millions of Nigerians renting their homes.
Under the new law, tenants can claim a deduction of up to N500,000 or 20% of their annual rent, whichever is lower, when calculating their taxable income. For example, an individual earning N6 million annually and paying N1 million in rent would receive a relief of N200,000 (20% of N1 million), reducing their taxable income to N5.8 million and resulting in an annual tax of N834,000. Under the previous system, the same individual would have faced a higher tax bill of N896,000 due to the consolidated relief allowance of N200,000 plus a 20% personal relief, equating to N1.2 million. This reform translates to a tax saving of N62,000 annually, or an additional N5,166 in monthly take-home pay for such individuals.
Tax expert John Nwokolo, speaking to TheCable, explained that the rent relief is designed to benefit low-income earners more significantly, while those earning above N25 million annually may face higher taxes. “The Act is structured to ensure high-income earners contribute more, while tenants with lower incomes enjoy meaningful relief,” Nwokolo noted. However, the relief applies exclusively to tenants, with no provisions for homeowners, a point that has sparked discussions about addressing Nigeria’s broader housing challenge.
The reform is part of a broader effort to modernise Nigeria’s tax system, stimulate economic growth, and reduce the cost-of-living pressures on citizens. Posts on X have highlighted public sentiment, with some users suggesting that the non-taxable income threshold of N800,000, combined with the N500,000 rent relief, may still fall short of addressing the economic realities faced by many Nigerians, where annual expenses for basic needs often exceed N3.6 million.
As Nigeria grapples with a housing deficit, the government has also introduced a Rent-to-Own Scheme to improve access to affordable housing, complementing the tax relief initiative. The Tax Act’s focus on tenants is seen as a step towards supporting urban dwellers, particularly in cities like Lagos and Abuja, where high rental costs place significant strain on household budgets. With this reform, the government aims to foster financial stability and promote fairness in the tax system, offering a lifeline to millions of renters across the country.
