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Homeowners insurance alone costs an average of $2,377 annually, and rates continue to rise.
If you do have homeowners insurance, you might be wondering if its tax deductible.
Generally speaking, you’re able to only deduct homeowners insurance if its for a rental property.
You cant deduct it from your primary residence.
When Is Homeowners Insurance Not Deductible?
Finding out which housing-related expenses are tax deductible is key if the goal is to save money.
When you qualify for atax deduction, you could subtract it from your income when filing taxes.
By claiming as many tax-deductible expenses as possible, you’re free to reduce your tax bill.
Unfortunately, homeowners insurance is typically not deductible for personal residences.
This is because the Internal Revenue Service (IRS) considers homeowners insurance as a nondeductible expense.
The same goes for fire or homeowners insurance premiums and any payments applied to your mortgage principal.
Renting out a property full- or part-time could qualify you.
You cant be an employee, so if you have anhourly or salaried position, you wont qualify.
Now, if you have mortgage insurance or private mortgage insurance (PMI) its no longer tax deductible.
This can cut down on your tax liability and increase the amount of cash in your pocket.
Just remember, only business use of a home qualifies for this.
Unfortunately, you cant write off the entire cost of homeowners insurance for your home office.
it’s possible for you to, however, take a partial deduction.
Before claiming this homeowners insurance tax deduction, verify you actually have a home office.
This might seem obvious, but not all offices count as offices underIRS guidelines.
You must use the space exclusively for business purposes, meaning the den and the guest bedroom dont count.
You must also not be employed as a W-2 worker.
With the simplified method, simply deduct $5 per square foot of the office space.
The maximum deduction is $1,500 or 300 feet.
Calculate (as a percentage) exactly how much space your office takes in your home.
This is also the percentage of your homeowners insurance premiums you’re free to claim as a deduction.
Take Away
So, can you deduct homeowners insurance?
If youre talking about your primary residence, the answer is generally no.
Keep in mind that taxes, tax credits and tax deductions are complex and may change at any time.
you’re free to learn more about GOBankingRates processes and standards in oureditorial policy.
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