The cost of home insurance can add up, especially if you own an expensive home or get optional coverage, such as flood or earthquake insurance. This leaves many wondering, can you deduct what you pay for home insurance on your taxes. A lot depends on what you use your home for and how you pay for your home insurance. Here’s more information about when and how you can deduct the cost of your home insurance from your tax bill.
Is home insurance tax deductible?
For the most part, the answer to the question of can you deduct your home insurance payments from your taxes is no. The IRS treats home insurance premiums as a regular living expense, and like food and clothing costs, you cannot deduct the expense of home insurance from your taxes.
Fortunately, there are certain instances when you can claim all or part of your home insurance as a tax deduction.
Cases when you can deduct home insurance from your taxes
Normally you can’t claim home insurance premiums as a tax deduction. In certain cases, though, you can. Depending on what you use your home for, how you pay for your home insurance, and if you experience any losses not covered by your home insurance determines whether you can claim all or part of your premiums on your taxes.
The section below goes into detail on when you can claim all or part of your home insurance premium when completing your taxes:
- Home office: If you work from home, you can claim part of your home insurance premiums as a business expense. How much depends on how much of your home you dedicate to a home office.
Keep in mind the maximum allowable square footage that you can claim as office space in your home when doing your calculation.
- Rental property: If you own a rental property, you can deduct the home insurance premiums you pay from your taxes.
Depending on the percentage of the property that serves as a rental determines the maximum amount of the home insurance premium you can deduct. So, if you rent out the entire home or complex, you can deduct 100% of what you pay in insurance premiums on the home.
- Private mortgage insurance: Private mortgage insurance protects a lender if the borrower defaults on a home mortgage. Paid by the borrower, such insurance allows them to claim their payments as a deduction on their taxes.
- Losses not covered by your home insurance: If you suffer a loss not covered by your home insurance policy, you can claim a deduction on your taxes associated with your home insurance.
You can claim any amount not covered by your home insurance policy when your home is damaged. This write-off even applies to theft or vandalism, with the homeowner able to deduct whatever the insurance company did not cover, minus any deductible.
How to claim an eligible insurance deduction
When claiming all or part of your home insurance premium as a tax deduction, you must follow certain rules when filing your taxes. If you take the standard deduction, then you cannot also claim an expense such as home insurance premiums on your tax form. You have to file an itemized tax return to do so.
Before filing an itemized tax return, make sure that you will receive more than the standard deduction. Otherwise, you should just use the standard deduction.
While you cannot claim your home insurance premiums as a tax deduction most of the time, in some cases you can. Working from a home office, renting out part or all of your home, or suffering a loss not covered by your home insurance all represent situations where you can claim all or part of your premiums as a tax deduction. Consult a tax professional if you need clarification on whether or not you are allowed to claim your home insurance premiums as a deduction before doing so on your taxes.