Typically, homeowners insurance doesn't come with a tax break, and premiums aren't tax-deductible either, even though your premiums may be factored into your mortgage payments. Why? Because the Internal Revenue Service (IRS) doesn't view homeowners insurance to be a nondeductible expense.
If you're a homeowner, what does this mean for you? This, unfortunately, implies that payments for home insurance cannot be itemized, nor can you claim title insurance on your tax return.
A homeowners insurance policy safeguards you against possible damages to your home. In addition, it usually offers coverage for the garden shed, fence, homeowner's driveway, and garage.
Homeowners Insurance Coverage for Small Business Owners
If you are currently running a business out of your residential property, it is advisable to confirm with your homeowners' insurance firm if they do offer coverage for it.
If you helm a larger business out of your home, coverage will most likely not be provided. A separate insurance policy for the business will have to be taken.
For instance, if you've got a daycare at home, it is likely that your insurance provider would demand that you apply for a commercial policy for your business.
Making Homeowners Insurance Tax-Deductible
There are two specific instances in which you may be able to get insurance payments deducted from your home.
Scenario 1: If your home or part of it is being used for business
You could try taking the square footage of your eligible home office space (or the allocated area that you work out of) as a percentage of the complete home square footage; that percentage could be applied to your premium, and the resulting figure could be deducted as a business expense.
Scenario 2: If you receive rental income from your house or are a landlord
Your homeowners' insurance on the part of the property used as a rental gets a tax break. In case you own multiple properties with those properties only being used for rental income, then the entire homeowners' insurance is tax-deductible.
In conclusion, homeowners insurance is integral to ensuring your property, home, and possessions are safeguarded against weather, fire, liability, or theft. In fact, if you're taking out a mortgage, a majority of lenders demand a policy. So, even if there's no tax deduction, investing in homeowners insurance is worth it.
