If there is one thing no one likes to do, it's pay taxes. No one likes to have to shell out thousands of dollars a year, but we all have to. Thankfully, Uncle Sam allows us to deduct a lot of major expenses from the amount we owe. This includes fees that we pay on homeownership. As many homeowners can tell you, it's possible to get a lot of tax breaks when you own a home. However, which tax breaks you qualify for can vary greatly depending on your situation and what you are doing with your house. This brings us to a question that many people tend to ask, especially when tax time starts inching around the corner. Is homeowners insurance tax-deductible, and if so, are there any specific guidelines you need to keep in mind when you're working on your taxes?
Can You Deduct Homeowners Insurance From Taxes?
If you are a typical "average Joe" worker, then your home is just the place where you live. This means that you probably will not be able to deduct insurance premiums from the amount of taxes that you owe. Homeowners insurance, while it's vital as a part of keeping your finances safe from calamity, is not considered to be something worth a deduction. Or more succinctly, homeowners insurance premiums are not given leeway as a necessary part of making money. As a result, you can't deduct them from your tax burden. The end result is that the vast majority of people won't be able to write this off as a deduction. While most of us don't get the luxury of writing off premiums, there is a little exception to the rule that makes it a possibility for people who have unique work situations to write things off.
Is Homeowners Insurance Tax Deductible for Business Owners?
Believe it or not, it very well could be. There are two main ways to include your homeowner's insurance as a tax write-off. If you use a part of your home as a home office, then you can add a proportional portion of your monthly insurance premiums as a tax write-off. For example, let's say that you have a home office that is one-fourth of your home. If you pay $100 a month, you can write off about $25 per month on the premiums you spend. The same can be said about renter's insurance. On a similar note, if you are a landlord, then almost all of your homeowner's insurance can be considered a business expense. This allows you to write off as much as the premium itself, as long as you have someone renting your house.
Writing off Your Homeowners Insurance
Writing off the premiums you've spent on your homeowner's insurance isn't something that you should take lightly. There are only a handful of reasons why you should ever consider using your home insurance premiums as a tax write-off, and if you do not match one of those situations, it's off-limits. If you choose to do so and don't have a home office or don't rent out your space, you could end up with a lot of problems. The IRS doesn't mess around with taxes and may trigger an audit. That's why we don't suggest trying this move with your insurance unless you call up your accountant first. When in doubt, have a CPA or an accountant look over your taxes or ask them ahead of time. With the right counsel, you should be able to make the right decision for yourself and your taxes.