Is home insurance tax-deductible?

What parts of homeowners insurance are tax-deductible?

For most people, none of their homeowners' insurance costs is tax-deductible. This includes your premiums and your deductible, if you paid it this year, as well as the cost of an losses you suffered. However, if you have a home office, own a rental property, or rent out a portion of your home, or suffer an uncovered loss as a result of a federally declared natural disaster, you can deduct some of your insurance expenses.

Are home insurance premiums tax-deductible?

Home insurance premiums are not tax-deductible for an owner-occupied primary residence that does not include a home office or a rental property. If you work from home, use part of your home as a business or rent out the house, you should be able to deduct some of your insurance costs.

You must be self-employed to deduct home office expenses, and you can only deduct the percentage of premiums that corresponds to the percentage of your home that is used for work. So, if you office occupies 25% of your home, you can deduct 25% of your premium.

“If you are self-employed (e.g. you have your own business or have 1099 income) you may be entitled to a home office deduction if you have dedicated space in your home where you regularly and exclusively conduct your business,” says Logan Allec, a CPA and founder of personal finance site Money Done Right.

Is my home insurance deductible tax deductible?

Your home insurance deductible is not a tax-deductible expense unless you suffered a loss in an area that is declared a national disaster area, and your insurer denies your insurance claim or only partially pays your claim. You can deduct the unpaid balance, including your insurance deductible, from your taxes.

With this deduction, you must also subtract $100 and 10% of your adjusted gross income (AGI) from the loss amount, and then whatever amount is left over can be deducted. Unless you suffered a large loss that your insurance didn’t cover, this deduction will probably not be that useful.

Can I deduct homeowners insurance losses from my taxes?

You can deduct losses that were either partially covered or not covered at all by your insurance company, and only if the property loss occurred in a federally declared disaster area, as established in the Tax Cuts and Jobs Act of 2017. This means that your loss must occur in an area that the President has declared a disaster, making the area eligible for federal relief or assistance.

As with the deductible, you must subtract $100 per incident and 10% of your adjusted gross income from the loss amount. The amount left after all of this can be deducted from your taxes.

Let’s look at a couple of examples to make this all a bit clearer:

Insurance company pays your claim in full: Your roof is blown off during a major storm, and the damage is assessed at $15,000. Your insurer pays your claim in full minus your deductible. None of this can be deducted from your taxes. Since your insurer paid the claim in full, none of the loss, including your insurance deductible, is tax-deductible. However, if the storm is declared a federal disaster, you can deduct a portion of your deductible.
- If it was a federal disaster: You could deduct the amount you paid for the deductible, minus $100 and 10% of your AGI. Unless you have a particularly large deductible, you may not get anything from this deduction.
Insurance company pays a part of a claim: Your roof is blown off during a major storm. While it was a big storm, the area was not declared a federal disaster area. The damage is assessed at $15,000, but your insurer only covers $5,000. Because the damage did not occur in a federally declared disaster area, you cannot deduct any of the $10,000 that your insurer failed to cover.
- If the area was declared a federal disaster area: You could then deduct $$9,900 ($10,000 minus $100) minus 10% of your AGI. Whatever is left over can be deducted from your taxes. In this case, you can even deduct your insurance deductible.

It should be noted that you cannot deduct the cost of home improvements that exceed the repair cost. For example, if your barn is destroyed and your claim is denied, you can deduct the barn's value (as long as you are in a federally declared disaster area), but you cannot replace it with a larger barn and deduct the full cost. Your deduction would be capped at the value of the destroyed barn.

Is homeowners insurance tax deductible for a rental property?

Yes, your insurance is tax-deductible if you own a rental property; if you rent out your primary residence from time to time or have a rental unit in your home or on your property, you can deduct a portion of the cost of insurance. It is considered a business expense that can be deducted. You will need to file a Schedule E (Supplemental Income and Loss) form to document your rental income and expenses related to that rental.

According to the IRS, “You can deduct the ordinary and necessary expenses for managing, conserving and maintaining your rental property. Ordinary expenses are those that are common and generally accepted in the business. Necessary expenses are those that are deemed appropriate, such as interest, taxes, advertising, maintenance, utilities and insurance.”

Is renters insurance tax-deductible?

No, renters insurance is not tax-deductible, with the exception of self-employed people who work from home; if that's the case, you can deduct the percentage of your renters insurance premium that corresponds to the percentage of your home's square footage used primarily for work, like a home office.

How does tax deduction work if you are working from home?

If you run a business or work out of your home, and are self-employed, you can deduct a portion of your home insurance. The amount you are eligible to deduct is based on your office's square footage in relation to the square footage of your home.

As an example, if your home office takes up roughly 12% of your home’s total square footage, you can deduct 12% of your homeowner's insurance premium.

There are qualifiers though, the space must be used as an office most of the time and must be in a specified area of the home; you cannot claim every desk and chair in the house as an office. Your office can be located just about anywhere on the property, though. If you have an outbuilding that operates as an office or a room above your garage that works as an office, you can claim the deduction.

The verdict: Is homeowners insurance tax-deductible?

Homeowners insurance is not tax-deductible for most homeowners. If you live in your home as a primary residence, don't use any part of your home for self-employed activities or as a rental, and haven't had a qualifying loss in a federal disaster, you can't deduct home insurance.

Here is a quick recap of the various deduction’s homeowners may qualify for:

Medical: If you have to modify your home for medical reasons (ramps, remodel bathrooms, etc.) you may be able to deduct those costs, but the costs must exceed 7.5% of your adjusted gross income.
Home office: If you run a business out of your home, you may be able to deduct a percentage of your homeowner’s insurance cost.
Rental property: If you own a rental property or rent out your primary residence (or part of it) from time to time, you may be able to deduct your expenses, including homeowners insurance costs.
Energy-efficient: Putting solar panels on your home or adding other energy-efficient features can result in a tax credit.
Losses: If your insurer denies your claim or only covers a portion of it, you may be able to write off the loss, but there are strict requirements that must be met.

The content of this article is not tax or legal advice and should not be considered a substitute for professional tax or legal advice. For current tax or legal advice that is relevant to your state, please consult with an accountant or a licensed attorney.

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