Jane Dotson
Homeowners insurance is not typically considered a tax-deductible expense. However, there are certain circumstances where you may be able to deduct some or all of the cost as a business expense. For example, if you rent out your home, work from home, or run a business from your home, you may be able to deduct a portion of your homeowners insurance premium from your taxes. Additionally, if your home insurance claim is denied or only partially covered during a federally declared disaster, you may be able to deduct the loss from your taxes.
| Characteristics | Values |
|---|---|
| Homeowners insurance deductible | The amount you’re responsible for paying out of pocket before your insurance company will pay on a claim |
| Tax deductions | Mortgage interest, local property taxes, mortgage insurance premiums, and accessibility home improvements |
| Homeowners insurance tax-deductible circumstances | If you rent out your home, work from home, or if your home insurance claim is denied during a federally declared disaster |
| Tax forms | Schedule E (Form 1040) – Supplemental Income and Loss, Schedule C (Form 1040) – Profit or Loss from Business, Schedule A (Form 1040) – Itemized Deduction |
| Homeowners insurance tax-deductible for landlords | Yes, renting property falls under business activities, so the costs that go into preparing and maintaining the property are considered business expenses |
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What You'll Learn
Homeowners insurance is not tax-deductible for most people
If you rent out your home for all or part of the year, your homeowners insurance premiums are tax-deductible. Renting property falls under business activities, so the costs that go into preparing and maintaining the property are business expenses rather than personal ones. If you rent out a room or split property usage between personal use and rentals, you can deduct a portion of the insurance based on square footage or business use.
If you work from home, you may be able to deduct a portion of your homeowners insurance premiums. The deductible amount is calculated by determining what percentage of your home's square footage is used for business purposes. However, this only applies if you are self-employed or a freelancer, not if you are a salaried employee of a company.
If your home or property is damaged and your homeowners insurance claim is denied or partially covered, you may be able to deduct the loss from your taxes if it occurred during a federally declared disaster. This is known as a casualty and theft loss deduction, where you can deduct a portion of the value of the property or home that was damaged or lost during a declared disaster.
There are other tax deductions available to homeowners that are not directly related to homeowners insurance. These include mortgage interest, local property taxes, mortgage insurance premiums, accessibility home improvements, and energy-efficient features.
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Renting out your home makes it tax-deductible
If you're renting out your home, you may be able to deduct some of your homeowners insurance premium from your taxes. This is because renting out a home is considered work, and the income you generate is taxable. Therefore, any money spent on a rental property is classed as a business expense, even if it's homeowners insurance.
If you rent out your home, you must report all rental income on your tax return and deduct the associated expenses from your rental income. These expenses include the ordinary and necessary costs of managing, conserving, and maintaining your rental property. Ordinary expenses are those that are common and generally accepted in the business, while necessary expenses are those deemed appropriate, such as interest, taxes, advertising, maintenance, utilities, and insurance. You can also deduct the costs of certain materials, supplies, repairs, and maintenance to keep your property in good operating condition.
If you rent out a room in your home, you can deduct expenses arising from your rental activity. You must divide certain expenses between the part of the property you rent out and the part you live in. You can fully deduct any expenses just for the room you rent, such as repairing a window, installing carpet or drapes, painting the room, or providing furniture. If you pay extra homeowners' insurance premiums because you're renting out a room, the full cost is a deductible operating expense.
If you work from home, the portion of your homeowners insurance premiums you can deduct from your taxes is calculated by determining what percentage of your home in square footage is used for business purposes. If you have a home business, you may be able to write off parts of your homeowners insurance premium payments as a business or self-employed tax deduction. However, this does not apply if you work remotely for a company in a salaried or hourly position and fill out a W-2 when filing your yearly taxes.
Additionally, if your home or property is damaged and your homeowners insurance claim is denied or only partially covered, you may be able to deduct the loss from your taxes if it occurred during a federally declared disaster. This is known as a casualty and theft loss deduction, where you can deduct a portion of the value of the property or home that was damaged or lost during a declared disaster.
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Running a business from home may allow deductions
If you run a business from home, you may be able to deduct a portion of your homeowners insurance premium from your taxes. However, this only applies if you are self-employed or a freelancer, and not if you are working remotely for a company in a salaried position.
The amount you can deduct is calculated based on the percentage of your home's square footage that is used for business purposes. This means that if you work from a specified area, such as a home office, and 15% of your house's square footage is dedicated to this workspace, then 15% of the amount you paid in premiums for the year can be deducted from your taxable income.
It is important to note that you cannot deduct expenses for parts of your home not used for business, such as lawn care or painting a room that is not used for business. Additionally, the IRS has strict guidelines regarding what expenses are deductible under the home office deduction. For example, the first telephone line in one's home is not deductible unless it is used for long-distance business calls, and lawn care and landscaping for non-business purposes are generally not deductible.
To claim the home office deduction, it is essential to follow IRS guidelines, as they change frequently. Consulting a tax professional can help you maximize your deductions while ensuring compliance with the regulations.
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Claiming on damages from federally declared disasters
If your home or property is damaged and your homeowners insurance claim is denied or only partially covered, you may be able to deduct the loss from your taxes if it occurred during a federally declared disaster. This is known as a casualty and theft loss deduction, where you can deduct a portion of the value of the property or home that was damaged or lost during a declared disaster on your taxes.
The damage or theft needs to have occurred during a sudden or unexpected event, meaning the loss was swift, unanticipated, and unintended, rather than gradual or progressive. For example, if an antique urn worth $6,000 was stolen from your home and the insurer only paid out $5,000 to cover your losses, you can claim a $1,000 loss on your taxes.
The insurance safe harbor method allows you to determine the decrease in fair market value (FMV) of your personal-use residential real property based on the estimated loss in reports prepared by your homeowners or flood insurance company. These reports must outline the estimated loss sustained from the damage or destruction of your property. If the loss occurred in a federally declared disaster area, you may use the contractor safe harbor method or the disaster loan appraisal method. Under the contractor safe harbor method, you may use the contract price for the repairs specified in a contract prepared by an independent and licensed contractor to determine the decrease in the FMV of your personal-use residential real property.
For tax years 2018 through 2025, if you are an individual, casualty or theft losses of personal-use property are deductible only if the loss is attributable to a federally declared disaster. If you have a home business, you may be able to deduct a portion of your homeowners insurance premium payments as a business or self-employed tax deduction. This is calculated by determining what percentage of your home in square footage is used for business purposes.
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Casualty and theft loss deductions
Casualty losses refer to damage, destruction, or loss of property resulting from a sudden, unexpected, or unusual event, such as a flood, hurricane, tornado, fire, earthquake, or volcanic eruption. These losses are only deductible during the tax year in which they were sustained, and only if they are not covered by insurance. If they are covered by insurance, you must file a timely claim for reimbursement and reduce the loss by the amount reimbursed.
For tax years 2018 through 2025, personal casualty losses are not deductible unless they are caused by a federally declared disaster. This includes major disaster declarations or emergency declarations. If your property is personal-use property or isn't completely destroyed, the amount of your casualty loss is calculated as the lesser of your adjusted basis in the property or its fair market value immediately before the casualty.
Theft losses are generally deductible if the theft was illegal under state law, committed with criminal intent, and related to a transaction entered into for profit. The amount of your theft loss is typically the adjusted basis of your property, as the fair market value of the property after the theft is considered to be zero. Similar to casualty losses, theft losses are only deductible if they are not covered by insurance or other reimbursement.
To claim a casualty or theft loss deduction, you must file Form 4684 with the IRS. This form helps taxpayers determine and report their losses, gains, and deductions. You will need to provide proof of the casualty or theft, such as media reports or other documentation showing damage or loss. Additionally, you must include the FEMA declaration number on Form 4684 if the loss occurred in a federally declared disaster area.
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Frequently asked questions
In most cases, homeowners insurance is not considered a tax-deductible expense. However, there are a few circumstances where you can deduct some or all of the cost of homeowners insurance as a business expense.
If you rent out your home, or work out of your home, you may qualify to deduct a portion of your homeowners insurance premium from your taxes. If you run a business from your home, you can deduct the portion of your homeowners insurance premium based on the percentage of your home used for business purposes.
Mortgage interest, local property taxes, and mortgage insurance premiums are tax-deductible home expenses. You can also deduct the cost of accessibility home improvements, such as adding a stair lift or wheelchair ramp, and energy-efficient features, such as solar panels.
If you rent out your home, you can deduct your homeowners insurance premiums by filing Schedule E (Form 1040) – Supplemental Income and Loss. If you work from home, you can deduct a portion of your homeowners insurance premiums by filing Schedule C (Form 1040) – Profit or Loss from Business.
If your home insurance claim is denied or partially covered during a federally declared disaster, you may be able to deduct the loss from your taxes. This is known as a casualty and theft loss deduction, and you can deduct it by filing Schedule A (Form 1040) – Itemized Deduction.
