Renter's insurance provides some peace of mind and financial protection. You may not own the dwelling, but you still have personal property at risk of fire or water damage, or theft, in a rental unit, and any loss you experience won't be the landlord's responsibility. Policies carry reasonable premiums, and under limited circumstances you can take a write-off for the cost.
The IRS and Insurance Premiums
In general, the tax laws don't look favorably on insurance premium deductions. Personal insurance -- whether for a car, a home or a rented dwelling -- is not deductible. The same is true for any single-item insurance you may carry, such as insurance for jewelry or other valuables, or a boat you may keep on the property.
Business Use Deductions
The IRS does allow deductions for business-related expenses, including expenses you may incur while doing business out of your dwelling. If you rent a store space on a ground floor, for example, rental insurance that covers the contents would be a legitimate tax deduction. If you've set up an office to work at home as an independent contractor, then a portion of your renter's insurance is also deductible. If you have a job but also work at home, you take the deduction as an itemized, unreimbursed employee expense on Schedule A.
The IRS requires you to apportion your home-office deductions to the percentage of dwelling space occupied by your home office. If you've got 25 percent of your apartment set up as an office, you can apportion 25 percent of the rent as a business expense. The same goes for renter's insurance; you must allocate the correct percentage to the home office, while the balance of your insurance premium would be non-deductible.
Claiming the Deduction
Independent contractors use Form 8829 to claim any home-office deductions. The same form applies to homeowners and renters. In the first part of this form, you figure the percentage of your home or apartment used for the office. Then you itemize the expenses, including insurance, on Line 17. You apply the percentage from Part 1 to the sum of all expenses, which can also include rent, utilities, repairs and "other." Complete this form and claim your deduction with care -- the IRS has a good handle on a reasonable amount for home-office deductions and will flag your return for an audit if you go overboard.
Starting with tax year 2013, the IRS allows a simplified "no doc" home-office deduction that does away with Form 8829. Instead of adding up and allocating expenses, you simply multiply the square footage of your home office by $5. The deduction is capped at $1,500, but does not require any documentation of actual expenses or a lot of calculator work. Generally, the smaller your home office, the more advantageous the new method will be.
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