The answer to whether or not homeowners insurance is tax deductible is kind of a mixed bag of good news/bad news. Generally, your premium costs are not deductible (bad news), but there are exceptions (good news). Since home ownership comes with some hefty expenses, it’s worth your while to find out if there are any related deductions for you to take advantage of. Here are four questions you should ask upon whether your home insurance tax deductible before you start.
1. Do you work at home?
If you have a home office you may be able to have home insurance tax deductible on your federal tax return. Whatever percentage of your housing expenses go towards your home office can also be deducted. For instance, if 20% of your housing expenses go towards your office area you can deduct 20% of your homeowners insurance premiums.
2. Did your home insurer only cover a portion of a loss?
If you filed a claim to cover a theft or damage to your property and were only partially reimbursed by your insurance provider, you may be able to have home insurance tax deductible on your federal taxes. These circumstances usually occur because your policy isn’t enough to cover losses, which may include any deductible.
3. Do you rent out your home?
If you have a homeowners insurance policy that covers a rental property in which you don’t live, you can deduct your premium costs as a business expense. You can even claim it as a business expense if you rent out a portion of the home where you reside; if you rent out 30% of your home, for instance, you can deduct 30% of your premium costs.
4. Are you paying for private mortgage insurance?
If you own less than 22% equity in your home, your mortgage lender is passing the expense of private mortgage insurance (PMI) to you. PMI pays out to the lender if you default on your loan. You can deduct the costs that have been added onto your mortgage payments to cover the PMI policy. When have paid off 20% of your loan you are no longer considered a risk and can request that the PMI be cancelled—by law lenders have to cancel once a borrower has paid 22% of the loan balance even without a request from the borrower.
Check with an accountant to find out if you qualify for any home insurance tax deductible items. You may be able to realize a nice tax deduction. If you are trying to find cheaper affordable home insurance, click here to reach our free online quote services.