Is Homeowners Insurance Tax-Deductible?

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Is Homeowners Insurance Tax-Deductible?

In general, homes insurance is not tax deductible, nor are premiums, even if they are included in your mortgage payments. Why? Because the Internal Revenue Service does not consider homeowners insurance to be a deductible item (IRS).

What does this imply for property owners? It means you can’t itemize payments for house insurance (including fire, theft, and comprehensive coverage) or title insurance on your tax return.

A homeowners insurance coverage protects a person’s house from possible harm. Furthermore, it usually includes a homeowner’s driveway, fence, garden shed, and garage.

Homeowners Insurance Coverage for Small Business Owners

It is worth mentioning that if you operate a small company on your property, such as a lawn care or gardening service, your homeowners insurance may cover up to a couple of thousand dollars. Whether you operate a business on your property, it is best to check with your homeowners insurance carrier to see if it is covered.

If you operate a bigger company out of your house, it is unlikely to be covered, and you will need to get a business-specific insurance policy.

For example, if you operate a daycare out of your home, your homeowners insurance policy would very certainly require you to get a commercial coverage for your company.

Key Takeaways

  • Premiums for homeowners insurance are often not tax deductible.
  • However, in other situations, they may be fully or partly tax-deductible as a business expense: for example, if you are a landlord.
  • If your house or property is destroyed in a federally declared disaster, you may be able to deduct uninsured financial losses incurred by your family as a result of the catastrophe.
  • Most mortgage lenders consider homeowners insurance to be a non-negotiable fee.
  • If you work from home and utilize a specific area in your house as your office (not the living room), you may be eligible to deduct a portion of your homeowners’ insurance.
  Rental Real Estate Taxes

How HomeownersInsurance Can Be Tax-Deductible

However, there are two exceptions in which you may be able to deduct insurance expenses from your house.

  1. If you utilize your house or a portion of it for commercial purposes. You could be able to deduct the square footage of your eligible home office space (or the portion designated for working in) as a percentage of the overall house square footage; you’d add that % to your premium, and the resultant number would be deducted as a business expenditure.
  2. If you own a property and earn rental money from it. Your homeowners insurance on the part of the property you rent out becomes tax deductible. When you own numerous homes and just use them for rental revenue, all of your homeowners insurance is tax-deductible.

The Bottom Line

Homeowners insurance is required to safeguard your house, property, and assets from fire, weather, theft, or liabilities. In fact, many lenders need you to have a policy if you are taking for a mortgage. So, even if it does not come with a tax credit, homes insurance is worthwhile.

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