Is Your Homeowners Insurance Tax-Deductible? Here’s What You Need to Know

The costs related to homeowners insurance, including its premiums and any losses you incur (despite being reimbursed by insurance) are not tax-deductible. This is because most homes are used for living purposes, so the Internal Revenue Service (IRS) considers home insurance premiums similar to utility bills and other monthly expenses. Not all types of coverages offered under personal home insurance are tax-deductible. These include-

  • liability coverage
  • earthquake coverage
  • hazard coverage
  • flood coverage

Nevertheless, in some circumstances, homeowners insurance is tax-deductible.

When Is Homeowners Insurance Tax-Deductible?

You can deduct a part of your home insurance premiums on your taxes in the following circumstances:

  • If Part of Your Home Is Used for Business Purposes

    A homeowner can deduct a portion of their premiums equivalent to housing expenses allotted to their home office. For example, if 20% of housing expenses are allocated for their home office, they can deduct 20% of the premiums per year. You can operate your business in any part of your home, including the garage, detached structure, etc. However, make sure your workspace is covered under your homeowners insurance policy and qualified for home office deduction, as not every room with a desk-like setup is considered a home office.

  • If You Incur Loss from a Federally Declared Disaster

    If you file a claim against the loss from the disaster, you cannot deduct the claim settlement amount from your taxes. Nevertheless, if your provider has reimbursed only the partial amount, you can deduct the remaining from your taxes- which could be your insurance deductible or depreciation value. Furthermore, you will have to subtract 10% of your adjusted gross income (AGI) and $100 per incident from the total damage amount. Also, you cannot deduct any amount beyond the repair cost, like the improvements you make.

    For example, if your insurer settles $5000 for damage worth $10000, you can write off $4900 (deducting $100), minus 10% of AGI. Besides this, any amount you spend for innovation/improvement cannot be deducted.

  • If You Rent Out Your Home

    If you own a condo or apartment and rent it out, you can deduct the premiums of landlord insurance that cover your rental property, as they are considered your business expenses. You can also write off the premiums of other policies covering your rental property, such as umbrella insurance.

  • If You Have Paid Mortgage Insurance

    You can deduct your premiums on your taxes if your mortgage insurance is linked with your home purchase and the contract is issued after 2006. Your mortgage premium deduction will be reduced if your AGI is above $100,000 ($50,000 if you are married and filing separately). You cannot deduct premiums on your taxes if AGI is above $109,000 ($54,500 if you are married and filing separately).

    A home insurance policy is inevitable to protect your home and its contents from unforeseen damages and losses. So, even if your home insurance does not qualify for tax benefits, its coverages and the protection it offers are worth the cost.

Insure Your Home with Advanced Insurance Group

At Advanced Insurance Group, we offer an all-inclusive homeowners insurance policy with comprehensive coverage options. So, without worrying about unfortunate incidents, you can live with peace of mind. Contact our insurance experts today to learn more.

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