When is your home insurance tax-deductible?
Homeowners insurance is tax-deductible in a few instances. If you rent out your home or run a business out of your home, you can typically deduct some or all of your insurance premiums. In some cases, you may qualify for a deduction if your property is damaged and your homeowners insurance claim is denied.
You run a small business out of your home
If you’re self-employed and regularly use part of your home as an office, then you may be able to claim the home office deduction. You can either take a simplified deduction or write off actual expenses, which include homeowners insurance and other home-related expenses.
The portion of your homeowners insurance premium that you can deduct is based on the percentage of your home, in square footage, that’s used for business purposes. So if your home measures 2,000 square feet and you regularly use 10% of that space as your home office, then you can deduct 10% of the amount you paid in homeowners insurance premiums.
How to Claim the Home Office Deduction
To claim this deduction, you’ll need to file Schedule C (Form 1040): Profit or Loss from Business.
You’re a landlord and receive rental income
Whether you rent out an entire property or just a room in your primary residence, you can write off some of the business expenses that come with being a landlord. Homeowners or condo insurance is one of those deductible business expenses.
You can claim the entire amount you paid for the annual insurance premium if you rented out the entire home. But if you just rented out part of the property, you can deduct the part of your expenses that applies to the rented portion. Landlords can also deduct the money spent on mortgage insurance, which is a type of insurance that protects the lender against default.
How to Claim Landlord Expenses
Claim these expenses on Schedule E (Form 1040): Supplemental Income and Loss.
You submitted a theft or loss claim that was denied
The casualty and theft loss deduction allows you to write off losses if your property is damaged and some or all of your insurance claim is denied. To qualify, the losses must result from a sudden, unexpected event during a federally declared disaster. You’ll also need to itemize your deductions on Form 1040, Schedule A.
You may deduct either the entire loss or a portion of it, based on what your homeowners insurance company covers. For instance, say a tree falls on your home during a hurricane, and the storm is considered a federally declared disaster. The repairs cost $6,000, but your insurance company will only cover $4,000. The $2,000 personal casualty loss is the tax-deductible portion. You may also need to adjust the deduction based on your income and other factors.
How to Claim the Casualty and Theft Loss Deduction
To claim this deduction, follow the IRS Instructions for Form 4684.
Learn More: How to Prepare Your Homeowners Insurance for a Hurricane Claim