Is homeowners insurance tax deductible? In deciding whether you should get homeowners’ insurance for your property, you need to be aware not only of the benefits. You also need to be informed about potential issues which can affect your finances.
A lot of homeowners ask: “Is homeowners insurance tax deductible?” The answer depends on the type of property you own.
The main reason why this question gets asked a lot is because the Internal Revenue System or IRS gives provisions for property owners who make mortgage payments every month, including the mortgage interest tax deduction.
The IRS, however, does not offer the same deduction for home insurance premiums. Simply put, if you are thinking of getting an insurance for your own home, you have to pay for that on your own. The IRS reasons that homeowners’ insurance premiums can be considered regular living costs, like food and clothing expenses.
In some cases, you can deduct a part of the insurance premium’s cost from your gross taxable income. Although that is substantially lower than a full deduction, you can use the savings to pay for the premium or toward other household expenses.
Property owners who are able to take advantage of this deduction do so by listing their home as their work location. If you currently have a home office set up in your home, you can notify the IRS and get a deduction based on the square footage of the area you use for your home office. Take note that your home office can’t be just a makeshift workstation that you use for business purposes from time to time. You can’t claim for a deduction if you conduct work in your den, living room or kitchen.
On the other hand, if you are getting insurance for rental properties, you can have the premiums deducted as a business expense. You may also make a claim for deduction should theft, damage or any other casualty occur in your home. For this, you will need to find the difference between the settlement and the cost of the loss. This is only possible when the insurance cannot cover for the total loss.
So is homeowners insurance tax deductible? Find out for sure by consulting with an accountant. An accountant will tell you whether you should opt for an itemized or standard deduction. It is highly recommended that you itemize deductions on tax returns, but the IRS does allow standard tax deductions for homeowners.
