You may know that your home’s taxes and mortgage interest are often a tax deduction. What about home insurance, then? Though you may think it is a deduction, in most cases it is not. As you consider this, then, think about a few ways that your home insurance is actually able to save you money. Here is some insight into what you can expect.
Are Home Insurance Premiums a Tax Deduction?
The short answer to this is no. Even though your home insurance premiums – or the cost you pay for coverage – may be a part of your mortgage payment each month, they are not themselves a tax deduction.
For example, many people can have their mortgage payment include their taxes and their home insurance premium. Yet, at the end of the year, you cannot claim your home insurance premium as a way to reduce your federal or state income tax, according to the IRS.
Are There Any Cases Where You Can?
There may be some very limited situations where home insurance may be a tax deduction. The first occurs when you operate a business out of your home.
Your business may pay for a specific amount of square footage in the home. If you allocate that amount of space to your business each year, you may be able to deduct the home insurance for just that portion on your business income taxes. This does not apply to your personal income tax, but rather to your business taxes.
For those who own and rent out the property, it may be possible to reduce some of your income tax. The home insurance premium on the rental portion of the building may be a tax deduction for the business itself. However, this only applies if you are a property owner. It is best to speak to your tax professional about this type of claim.
How Does Insurance Save You Money?
While it may not be a deduction on your taxes, homeowners insurance is very valuable. It can help to pay for many of the repairs you have to make on your home over time if they are due to accidents or storms. It can also help to provide you with protection from claims if someone falls at your home or your dog bites them. In short, home insurance is worth the investment even if you are not likely to get a tax deduction from it.