Owning your own home can be costly, so it's no wonder you're looking for ways to save money. Some of the costs of home ownership are tax-deductible, and you can write off certain types of insurance premiums as well. In certain circumstances, you may be able to write off a portion of your homeowner's insurance premiums when you're trying to trim your tax bill.
While you usually can't deduct your homeowner's insurance premiums on your taxes, some exceptions apply if you have a business office at home or rent the home out. You may also be able to deduct some of your deductible if you file a claim.
Importance of Homeowner's Insurance
Homeowner's insurance protects you in the event your home and belongings are damaged, stolen or destroyed. For example, a homeowner's policy covers damage or destruction of your property caused by fire.
Likewise, homeowner's insurance covers you in the event someone gets hurt in your home or by a member of your household. If a neighbor slips and falls down your steps, for instance, your homeowner's insurance covers your liability for this accident. If Rover bites someone, your policy may cover your liability for that as well.
Available Tax Deductions
While some types of insurance are tax-deductible, homeowner's insurance usually is not. The premiums for this type of insurance are considered ordinary cost-of-living expenses. So you may be out of luck with this one – except in a couple of situations.
If you or your spouse or partner has a business office at home, you may be able to deduct a portion of your homeowner's insurance on your tax return. Likewise, you may be able to deduct homeowner's insurance if you rent the home out rather than live in it.
Other Forms of Tax Relief
Though homeowner's insurance is usually not tax-deductible, you can get tax breaks for claims it won't pay or doesn't fully cover. For example, if you suffer damage to property in your home and your claim for coverage is denied, you can deduct it as a casualty loss on your tax return. The same goes for damage to that cool stereo you bought for your living room. If your insurance claim is refused, you can deduct it using IRS Form 1040, Schedule A.
Some rules apply here, however. First, the initial $100 of a loss is not tax-deductible. Second, you can only deduct losses that total more than 10 percent of your adjusted gross income. If your insurance policy covers part of your loss, you can deduct the rest subject to the rules concerning the first $100 and 10 percent of your adjusted gross income.
Homeowner's Insurance Deductibles
Homeowner's insurance deductibles can be tax-deductible. If you have a $1,000 deductible and you suffer a $5,000 loss, for example, you'll have to pay the first $1,000 of this out of your own pocket. The first $100 of your loss won't be tax-deductible, but the other $900 will be if it amounts to more than 10 percent of your adjusted gross income.