If you own a house, a homeowners insurance policy can help you avoid getting stuck with a huge bill if the property gets damaged by a storm or a fire, a visitor gets hurt, or someone breaks in and steals your belongings. Homeowners insurance premiums can be costly. You might be wondering if you can deduct those expenses when you file your income taxes.
For most people, the answer is no. If your house is simply a place for you and your family to live, you won’t be allowed to deduct your homeowners insurance premiums when you file your taxes. You might, however, be able to deduct some or all of that expense if you run a home-based business or rent out the property.
Deductions for a Home-Based Business
The Internal Revenue Service has strict guidelines that determine whether a taxpayer may deduct homeowners insurance premiums. You might qualify if you run a business out of your house or if you’re self-employed and you have a space in your house that you use as an office.
If you’re eligible, you’ll be able to add up your business-related expenses and deduct them when you file your taxes. Another option is to use a simplified method and calculate your deduction based on the square footage of your home office.
Deductions for a Rental Property
You might be able to deduct your homeowners insurance premiums if you rent out your house to generate income. If you don’t live in the house and you rent out the entire property, you’ll be able to deduct the total cost of homeowners insurance. If you and your family use the house as your residence and you only rent out part of the property, you’ll be able to deduct a portion of your homeowners insurance premiums.
You’ll have to pay income taxes on money that you earn by renting out the property, but you might be able to deduct some other rental expenses and reduce your total tax liability. For example, you might be able to write off bills for maintenance, repairs and utilities.
Itemizing vs. Taking the Standard Deduction
Even if you’re permitted to deduct your homeowners insurance premiums on your tax return, that might not be the best option. Depending on your specific circumstances, you might save more money by taking the standard deduction.
How a Tax Professional Can Help
An accountant can tell you if you’re eligible for a homeowners insurance deduction. If so, the accountant can calculate how much you’re allowed to deduct, look at other aspects of your financial situation, and tell you if it would make more sense to itemize your deductions or take the standard deduction.Â
