Can You Deduct Your Homeowners Insurance Premiums? Let’s Clarify

The straightforward answer is “NO.” Insurance premiums paid for your primary residence are not tax deductible. However, there are some exceptions. So, this blog post will clarify when an insurance premium becomes tax deductible and other ways to save on homeowner insurance. 

We understand that buying a home and insuring it are major expenses. Nevertheless, thinking about cutting costs becomes obvious. 

Homeowner Insurance Deduction Possibilities:

If you are using the property only for your primary residence, you cannot expect a tax deduction in any way. However, if the property is use for multiple purposes, some portion of the premium becomes tax deductible. Here are possibilities to deduct a certain amount from your tax bill:

Rental Property:

If you own a rental property or use a part of your home, such as a spare bedroom and garage, for rental purposes, the premium paid for that part becomes a business expense. According to Publication 587, insurance is listed as one of the operating expenses you can deduct for the part of your home used for business. 

Home Office Deduction: 

If you qualify for the home office deduction, you use a specific area of your home exclusively and regularly for business. You can deduct a portion of your homeowner’s insurance. This deduction is based on the percentage of your home used for business. For instance, your home office occupies 10% of your home’s square footage, you can generally deduct 10% of your insurance premiums. 

It is crucial to consider that you must be self-employee, not a remote employee, to qualify for the home office deduction. Further, there are two ways to get a tax deduction.

• Actual Expense: The cost of maintaining a business from home, such as electricity bills, internet bills, maintenance, and utilities for business. Be honest with this, and always keep a record of all bills and receipts to back your deduction claim. 
• Simplified Amount: You get a deduction per square foot. That means, for each square foot used for your business purposes, you can deduct $5. Keep in mind that the maximum limit for home business space is 300 square feet. That means you can deduct a max of $1500.

You can choose whichever method suits you and get the lowest tax bill possible.

Federally Declared Disaster Losses: 

You can deduct uninsured losses to your home caused by a major disaster declared by the federal government. These generally include deductions for a hurricane, flood, or earthquake. This can include damage that your homeowner’s insurance didn’t fully cover. Keep in mind, this deduction applies specifically to federally declared disasters.

Why Primary Home Insurance Isn’t Deductible?

When it comes to income tax, home insurance is consider a personal expense. The income tax is generally related to taxable income generation. Thus, the property that doesn’t generate income can’t reap the benefits of income tax deductibles.

According to U.S. federal law, insurance premiums are in the personal expense category, the same as groceries and utilities. Additionally, giving tax benefits to homeowners on insurance premiums will create a loophole in the tax system, compromising the rights of renters.

Other Ways to Save on Homeowner Insurance Premiums:

There are still ways to save money, even though the tax deduction for your insurance premium has many restrictions. Here are a few things you can consider when looking for ways to cut the cost of homeowner insurance premiums:

Get Multiple Quotes: 

When buying an insurance policy, don’t just purchase the first quote you get. There are multiple insurance providers in competition, and a few of them offer great discounts over others. If you are unsure which one to buy, leave this heavy lifting work to Smart Apple. We compare prices and policies on your behalf and present to you the ideal possible deal.

Bundle Up Insurance Policies:

Who doesn’t love business? If you ask your current insurer about bundling up homeowner’s insurance with auto insurance, they will propose a discounted rate. Bundling up policies works 99.9 times, if not 100. Additionally, you can explore new insurers for better deals. 

Increase Your Deductibles:

Increasing deductibles will lower your insurance premiums. It is the amount that you will pay out of pocket when a claim situation happens. 

Install Safety and Security Features:

Insurance companies appreciate installing safety and security features in your home. It helps minimize the risk of accidents, leading to lower insurance claims. If you have some safety features such as burglar alarms, security cameras, security lights, and physical barriers, they can significantly lower your insurance premiums. 

Review Insurance Policy Annually:

There can be infinite changes going on in your life. Thus, an annual review of your insurance policy is important. For instance, buying a rare art piece, welcoming an old person into your home, getting married, renovating, or simply finding a better deal.

Final Verdict:

While deducting home insurance premiums from taxes isn’t possible to a very great extent, there are still ways to save money. One of the most viable ways is to buy a premium at the right price and review the policy annually to find better deals. You can lean on Smart Apple insurance broker services to get budget-friendly premiums. 

Your Questions Answered Here!