Is Homeowners Insurance Tax Deductible?

Is Homeowners Insurance Tax Deductible?

Is Homeowners Insurance Tax Deductible?

Answer  Homeowners insurance premiums are not tax deductible in almost all cases. But there are some limited exceptions.  

Generally, homeowners cannot deduct their home insurance premiums on their taxes unless the premiums are for a rental property or they have a home office that qualifies, says Debra Cope, CPA, an accredited tax preparer and adviser in Chattanooga, Tennessee. 

Home insurance premiums on a rental property are deductible as long as the home is not the owner’s personal residence, Cope explains. Homeowners who rent out a part of their home may be able to deduct part of their homeowners insurance, but not all, she adds. 

Homeowners may also be able to deduct a portion of their homeowners insurance premiums if they are self-employed and run a business out of their home. The home office deduction does not apply to many typical work-from-home setups, such as a company employee working remotely, according to Cope. 

“It’s a very small portion of people who are able to deduct their homeowners insurance,” says Cope, who has worked in the industry for more than 25 years and is the current president of the National Society of Accountants.

Even in these limited cases, Cope cautions, the details matter. For instance, the Internal Revenue Service (IRS) has two different methods for calculating the home office deduction, only one of which factors in homeowners insurance premiums. 

There are other tax deductions for homeowners: 

Mortgage interest: Homeowners can typically deduct the annual interest paid on their mortgage (up to $750,000 of mortgage debt), if they are itemizing deductions. Mortgages obtained before Dec. 16, 2017, have a cap of $1 million annually. 

Property taxes: State/local property taxes are also typically deductible when itemizing, but they are currently capped at $10,000 per household per year. 

Homeowners used to be able to deduct their mortgage insurance premiums (also called PMI), but the deduction expired and is no longer allowed.  

For many homeowners, itemizing their home-related expenses will not get them a bigger return, according to Cope. Recent tax law changes, she says, increased the standard deduction for taxpayers, making that a more beneficial option for many homeowners. Since tax laws change and the standard deduction fluctuates based on inflation and other factors, Cope recommends evaluating deductions annually. If in doubt, she says, consider consulting an accredited tax professional. 

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