Is My Homeowners Insurance Tax-Deductible?

Let me start off by saying, I am not a tax professional and you should seek counsel from one before making any changes. 

Typically, your homeowners insurance is not tax deductible. That goes for most of the costs associated with homeowners insurance, they are not tax deductible on your federal tax return. Your homeowners insurance premium is included and any property losses you may encounter. This is regardless of if they were covered under your current homeowners insurance policy.

There actually are some exceptions where you may be able to deduct part of your homeowners insurance premium from your taxes. One major example is if you use your home as your business. You may also be able to deduct any uninsured financial losses if the home is damaged in what may be deemed a federally recognized disaster. 

When is homeowners insurance deductible from taxes?

Generally, homeowners insurance is not tax deductible. Most people who have homeowners insurance coverage use it primarily for personal uses. Due to this reason the Internal Revenue Service notes that homeowners insurance is nondeductible. It is similar to the cost of utilities. 

This will apply to earthquake and flood insurance. As well as all the basic coverages including liability, hazard, and property coverage. If the coverage is deemed to cover your personal home use, more than likely you will not be able to deduct it. 

There are some situations where you may be able to deduct your home insurance premium or at least possibly a portion of it on your taxes. 

You have a home office and want to deduct homeowners insurance premium from your taxes

One situation when you may be able to deduct homeowners insurance from your taxes is when the policyholder has a home office in the insured home. The amount you can write off may vary. Generally you can write off the percentage of the total expenses paid towards the home office. For example, if you pay 20% of the expenses towards your home office, you should be able to write off about 20% of your homeowners insurance premium. 

There will be qualifications as to what counts as a home office. You can exactly say every room with a desk is part of the home office. The area of your home you decide to include as the home office must qualify as a proper work space. All homeowners insurance companies have different rules regarding this, so you’ll always want to check with your actual homeowners insurance company first. 

You may have converted your mother in law quarters into your office area, or maybe you converted your garage into a work space. Both should qualify as a home office as long as it is used for the purposes of your business. The area you determine to be your home office should primarily be where your business operates. 

Can you deduct losses on your homeowners insurance in a disaster? 

For the most part, you can not deduct losses that may have occurred due to personal casualty or theft. This is usually regardless of whether or not the loss is covered by your homeowners insurance. There is one exception, if the loss happened during a federally declared disaster area and the damage was actually caused by the disaster. Examples of federally declared disasters may be floods, storms or wildfires. 

Please keep in mind, if you happen to file a claim related to a federally declared disaster you more than likely will not be able to write off the amount of the settlement. With the exception of if you’re only partially reimbursed by the homeowners insurance company. You should be able to write off the remaining value of what was lost, that wasn’t reimbursed. Usually this amount can include homeowners insurance deductibles and the depreciation if you’re covered by actual cash value insurance coverage on the home.

Another important point to keep in mind is may not be able to deduct the cost of home improvements that go beyond the cost of the normal repairs of the home. For example if you decide to go above and beyond in the improvements when rebuilding the home after a disaster. More than likely the additional costs will not be tax deductible. 

Can I deduct the costs associated with my rental property? 

Usually, your homeowners insurance premiums that you pay to your rental property may be tax deductible. A rental home is determined to be a business expense and therefore are treated like many other business expenses and are tax deductible. 

The amount that is tax deductible is determined by the amount of the rental is used as a rental. For example you may rent out a room in your home. If this is the case you may only be able to write off the one room you rent out. 

If you rent out the entire home, you more than likely will be able to write off 100% of the insurance premiums covering the rental. 

Wrapping up; If you still have questions regarding homeowners insurance or would like to look into a new policy, please give us a call! We have amazing agents that get clients fantastic rates everyday. Call us at 916 313 6100