The premium you pay on your homeowner insurance cannot be deducted from your tax return. This is because IRS considers home insurance as a normal living expense, such as utility bills.
However, there are certain situations where expenses related to homeowner’s insurance may become tax deductible and help in reducing your tax burden.
Let’s take a brief look into these scenarios:
Premiums for Home Office
If you have a home office in your premises that is deemed tax-deductible by the tax authorities, then the insurance premium you pay on that is tax-deductible too.
This means that if you allocate 20% of your home insurance policy towards your office, then you can deduct 20% of the premium from your tax return.
However, not all spaces qualify as home offices. Firstly, you should be using an entire portion of your house for commercial purpose without any residential activities taking place. It should be a place that is regularly used for interacting with customers or businesses partners, and should be the principal location of the business.
Sometimes, insurance companies do not pay out the entire loss that you face, either because of the limitation of the policy or the dispute in assessment of the loss.
In such a case, the loss you will have to face that is not covered under insurance, becomes tax deductible. For example, if your roof is destroyed and requires $20,000 for repair, but your insurance company only pays you $10,000, then you can deduct the loss of $10,000 from your taxable income.
Premiums on rental Properties
If you have several rental properties which provide you with a source of income, then you can deduct the insurance premium that you pay for them from your federal tax return.
This is because rental properties provide business income, and any expense that you incur in running those properties can be deducted from taxable income.
Private Mortgage Insurance
If you have taken out a private mortgage insurance to get a loan on your house, then the premium you pay on it can be deducted from your federal tax return.
This is because a private mortgage insurance policy is something that covers the lender rather than you, and is therefore an expense that you have to bare in order to obtain mortgage.
If you are looking for an insurance broker to get a good deal on your homeowners insurance, then get in touch with Manatee Insurance Services.
We are the leading insurance service in the region and provide customized insurance solutions in the best prices.