You may have heard you are entitled to quite a few tax deductions as a homeowner. Since homeowners insurance is one of several major expenses you must pay every month, you may be wondering if you can give yourself a tax break by writing off a portion or all of your premiums. Generally, homeowners insurance is not tax-deductible, but there are a couple of exceptions when it is. Here's more about this benefit.
If you use your home as a rental property—meaning, you let people rent a room or the whole building—you can write off a portion of your home insurance premium that corresponds to the size of the space you're renting. For instance, if you rent out your 500 square foot basement that represents a quarter of the square footage in your entire home, you can write off 1/4 of your premiums as a business expense. If you rent the whole property, then you can write off the entire amount.
Where you should write off the amount depends on how you have your rental business set up. If you've incorporated your business, then the deduction would likely be taken off your corporate taxes. Sole proprietors may be able to take it directly off their personal taxes. It's best to consult with an accountant for more accurate information for your particular situation.
Home Office Deduction
Your home insurance premiums may also be deductible if you run a business out of your house. Like with the deduction for rental property, you would only be able to write off the amount that corresponds to how much space your home business takes up in your home. Again, if your home business takes up 10 percent of the square footage in your house, then you can write off 10 percent of your insurance premium.
Be aware, though, that many homeowners insurance policies specifically bar coverage for home businesses because of businesses typically represent higher risk and have the potential to generate damages that far exceed the policy limits. Thus, you may need to purchase a special rider to cover your business or obtain separate business insurance that covers your company's activities.
It's best to consult with an insurance expert for more information about this particular issue. Regardless of the type of insurance you ultimately end up with, you can write the premiums off your taxes as a business expense.
For more information about tax deductions related to home insurance or to obtain coverage for your property, contact an insurance broker.Share