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FAQ: Is Home Insurance Tax Deductible?

Most homeowners in the US have their properties insured. This is mostly because a home is a precious asset that needs to be protected. You generally pay for homeowners’ insurance through premiums. These are monthly or annual installments you pay to your insurance company to keep your home protected from weather damage, fire, and other events.

However, since this money is getting paid off to a company and is a form of expense (a purchase), a question on taxes arises. You may be thinking then, is home insurance tax deductible? Keep reading to find out!

Generally speaking, home insurance is not tax-deductible because of a few different reasons. Since an insurance policy claims that it will cover the costs of any damages done to your house, it is automatically assumed that insurance premiums are not an expense but rather a backup for any potential damages. So, home insurance is not seen as a consumer expense by the Internal Revenue Services (IRS). However, there are some instances where it can be tax-deductible.

When Is Home Insurance Tax Deductible?

While home insurance comes under the nondeductible payments section in the IRS system, there are a few exceptions. You can deduct a portion of your home insurance from your taxes if you use your home as office space from where you work and conduct your business.

Other than that, you can also deduct all uninsured expenses or financial losses that you may have to incur in case of damage caused to your property. This is only the case when the damage is caused by a federally recognized reason such as a storm or an earthquake, among others.

A Home Office

In the case of office space, the tax-deductible has to be calculated in a precise way. This means that not every room with a table and a chair can be considered as an office. The office must meet certain criteria in order to be legitimate in the eyes of the IRS.

If 15% of all your home expenses go towards your home office, you can write that 15% off on your taxes to be deducted. In fact, whatever space your business occupies in your home is also tax-deductible.

For instance, if you are using your garage or your basement for storage or for other operations, you can also claim them as deductible costs in your taxes. Since these spaces are still a part of your home, regardless of whether or not your home is insured, you can still write them off as a business operating area and claim your tax returns.

With this in mind, there is one thing that becomes somewhat of an issue. When you get a home insurance policy, you are not getting your business assets and property insured altogether. Most home insurance companies do not cover both at the same time. They will most likely only cover the costs of potential damages to your home, not considering the value of your business assets. So, you may have to get additional insurance coverage for your business, even if it's operating from within the home.

Renting Out Your Home

Another instance where you can deduct home insurance from your taxes is when you use your home as a rental property. If you buy a house, get it insured as your own, and then rent it out, the money coming in as rental income will be eligible for a tax deduction.

This is primarily due to rental arrangements being considered as legitimate work by federal and state laws. Since you’re generating money, the IRS will view it as an income that can and should be taxed. So, if you invest in a property to be rented out and then insure it, that insurance will also be seen as a work expense, and you can add it to your tax returns.

When filing your taxes, you must also submit a Schedule E form that entails the amount of rent you collected in the given year and if you are currently residing in that house. For taxation purposes, it is much better if you do not live in the house you have rented out. The form will also show the length of time you have had the property and how long it has been rented out for.

What Home Insurance To Choose

Now that you know how your home insurance can and cannot be taxed, you can move on to finding an insurance company that will best suit your specific needs. If you are tired of going on individual websites and calling insurance companies to find out what their policies are and want the easy way out, then look into quotelab.com.

This website is the best place to get home insurance quotes from different home insurance companies. Quotelab is great if you want a quote comparison, prices, policies, and reviews all in one place. In fact, the site also provides auto and motorcycle insurance quotes for people who are interested in ensuring their vehicles.

Conclusion

When you're looking to buy a home insurance policy, you should always consider your options, weigh them, and compare them as to how they may interact with taxation policies. With Quotelab and its marketplace, you will be able to find the most optimal resources for insurance policies that you can buy.

So, head over to the website and start getting quotes on home insurance today; you may find the perfect home insurance company in the next hour.