Is homeowners insurance tax deductible?

Let me start off by saying I am not a tax professional and am simply stating my opinion. You should speak with whoever does your taxes before making any changes. 

In the majority of cases, homeowners insurance is not deductible on your taxes. There are circumstances where you may be able to claim deductions. For example if you work from home or are a landlord and rent your house out.

But, for the most part homeowners insurance is not tax deductible, including premiums. This would still be the case even if your homeowners insurance is included with your payments. 

Please keep in mind Private Mortgage Insurance (PMI) is different from your homeowners insurance policy. PMI covers the lender in case you are to default on your loan and homeowners insurance covers you for your home. This article is specifically about homeowners insurance. 

Basic write offs for homeowners;

The IRS considers homeowners insurance a nondeductible expense. So why not explore our options and find ways we can get a break on our taxes as homeowners.

Mortgage Interest Tax Deductions

This is one of the more common ways of getting a tax break for your mortgage. What this will allow you to do is claim the total amount that you paid in mortgage interest within the year. 

Your Property Tax Deduction

With home ownership comes property taxes. The amount each homeowner pays differs between states and countries. The value of your home will play a factor as well. If you itemize your taxes each year you can deduct your property tax payments. 

Rental Property Deductions

You have to pay taxes on rental income, but you are also eligible for tax deductions if you rent out part of your home. Things like maintenance, repair bills, utilities, certain insurance and other things can make up for what you’re paying in rental tax. Speak with a tax professional so you can utilize this to it’s max deductions. 

The Points You Pay on Your Mortgage

Most homeowners are not aware of this but you can buy mortgage points to get a lower interest rate on your home. The great thing about these points is you can write them off. Most states will allow you to write off 100% of these fees. 

Do You Have a Home Office

There are situations where a home office would be considered a business expense. Especially if you are self employed and work from home. Please keep in mind it’s usually required that you are self employed and not working remotely for a company. 

Have You Made Improvements to the Home

A lot of home improvement projects will qualify for tax deductions. Talk about killing two birds with one stone. You upgrade your home, increase the value and you have some write off when everything is said and done. 

Are There Medical Reasons for Home Improvement

If you need to make improvements to your home due to medical reasons you may be able to deduct those expenses. For example if a medical condition forced you to put in a ramp or extra railing there’s a good chance you can include these as deductions. 

Energy Efficiency Tax Deductions

This rule differs between states, but in most if you make your home energy efficient you can receive a tax incentive. The Residential Renewable Energy tax credit will let you claim tax credits when you install solar on your home. This credit is usually good for primary and secondary residences. 

Capital Gains Tax Exclusion

On a lot of our minds is whether or not we have to pay capital gains tax if we sell our homes. The good news is, more than likely you won’t have to pay any capital gains cost when you sell your home. The taxpayer relief act of 1997 states you may be exempt from paying any capital gains tax if you meet certain criteria.

Homeowners insurance is not tax deductible

With homeowners insurance not being tax deductible we have to look towards our two best options to find a tax break. Rental property and running a home business. 

When you use your home as a home based business. There’s a possibility you can take the square footage of your office or work space as a percentage of the entire homes square footage. You would then be able to apply that percentage to your premium and deduct the end number as a business expense on your taxes.

You may rent out a portion of your home. If you were to own several properties and those properties were solely used for income purposes, the homeowners insurance on those properties may become tax deductible. 

If you have additional questions or would like to speak to an insurance professional about a new homeowners insurance policy. Please feel free to give us a call. We would love to hear from you! [click here to call an agent now]