Can You Deduct Homeowners Insurance On Your Taxes?

Cue the ominous music. Tax season is almost here. While you can’t officially file your taxes with the IRS until January 27th, plenty of people are already getting their documents in order for tax season. Part of the challenge of each tax season is determining what you can write off and what you can’t. While we’re no substitute for advice from your financial planner or accountant, we do have one tip for the upcoming tax season to share with you. There are some circumstances where you can deduct homeowners insurance on your taxes. Let’s dig a little deeper into which circumstances and the questions you’ll want to ask your accountant for both this year and years to come.

For Most Homeowners, The Answer Is No

Let’s get this out of the way first. If you’re hoping to deduct homeowners insurance on your taxes, you’re probably not going to be able to do so. This is mainly because homeowners insurance is considered a necessity, especially if you have a mortgage. Simply put, homeowners premiums are just part of the cost built into owning a home. (If you currently own your home outright and don’t have homeowners insurance, we strongly recommend you add coverage immediately. The financial risk of losing your home is much greater than the cost of insurance premiums over the coming years. For more information, check out our post on Why It’s More Expensive To Skip Homeowners Insurance.) So with the hopes of many filers dashed, let’s look at the exceptions to the rule. Generally you’ll need to be a business owner that operates your business out of your home. Landlords who rent property they own may also be able to deduct homeowners premiums.

Business Owners

Today more and more small business owners are operating out of their own homes. This trend is nothing new, and finding the right space can be challenging for some, but it does present a potential tax break. However as you would expect, there are some limitations. You can deduct a portion of your homeowners premiums each year as long as you meet specific criteria.

Dedicated Office

First, you have to have a dedicated space for your office. It cannot be a space shared with other home functions. In other words working on the kitchen table on your laptop does not make it an office. Same goes with a den or second bedroom with a desk in it. Your home office has to only house business activities, nothing more. If you’re not sure if your work space qualifies, contact your account to learn more. Often business owners may convert a room to a dedicated office to be eligible for the deduction. This is certainly something to consider if you work from home.

Square Footage Percentage

Next, only the square footage of your dedicated office can be deducted. Essentially you’ll take the total square footage of your home, factor in how much of it is office space, and that percentage is tax deductible. Smaller offices will result in smaller deductions, and larger offices might amount to a larger deduction. That’s just the rule folks. Generally speaking, it is still worth it to deduct even if your office is small. Speak with your accountant to learn more about how it works.

Renters Are Eligible As Well

Business owners who rent property instead of own it are also eligible for a potential square footage tax deduction. Again the space must be a dedicated office. Once again, direct your questions to your accountant to receive more information.

Landlords

Landlords are the other type of business owner that may be eligible for a tax deduction on their homeowners premiums. Naturally a homeowner must be receiving rental income from a property they own. This includes both separate properties and shared properties. For example a rented coach house next to the landlord’s home is also included. Landlords can own multiple properties and be eligible for a deduction on each as long as they are receiving rental income on each property. Note the landlord’s own dwelling where they reside is non-deductible. For more information, contact a licensed accountant or financial planner in your area.

Final Thoughts – Deduct Homeowners Insurance On Your Taxes

As you can see, it’s not impossible to deduct homeowners insurance on your taxes, but it’s an option that is only available to certain business owners. There are a couple other nuanced ways you may be able to deduct homeowners insurance, for example if you have private mortgage insurance, but this is something prospective buyers should discuss with their accountant before they buy. If you’re reading this and thinking about future business endeavors, feel free to reach out to Square State Insurance. We’re happy to outline how your homeowners coverage might change by adding rental properties or building a new office. Contact us today to learn more.

This article is meant to be a speculative examination of potential homeowners insurance tax deductions. It is not intended to provide precise tax advise for any reader. Rather it should spur further conversations with your accountant or financial planner. It is intended to be informational and should not be considered as a recommendation of any kind. Square State Insurance is not liable for any tax filing decisions readers may make. For more information, contact the IRS or a licensed accountant in your area. Note: tax laws can vary from state to state. 

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