Is Homeowners Insurance Tax-Deductible?

In general, neither homeowners insurance nor premiums are tax deductible, even if your premiums are included in your mortgage payments. Why? Because the Internal Revenue Service does not consider homeowners insurance to be a deductible expense (IRS).

What does this imply for property owners? It means you can't itemize payments for home insurance (including fire, theft, and comprehensive coverage) or title insurance on your tax return.

A homeowners insurance policy protects a person's home from potential damage. Furthermore, it usually includes a homeowner's driveway, fence, garden shed, and garage.

Homeowners Insurance Coverage for Small Business Owners

It is worth noting that if you run a small business on your property, such as a lawn care or gardening service, your homeowners insurance may cover up to a couple of thousand dollars for it. If you run a business on your property, it is best to check with your homeowners insurance company to see if it is covered.

If you run a larger business out of your home, it is unlikely to be covered, and you will need to obtain a separate insurance policy for the business.

For example, if you run a daycare out of your home, your homeowners insurance policy will almost certainly require you to obtain a commercial policy for your business.

How Homeowners Insurance Can Be Tax-Deductible

However, there are two exceptions in which you may be able to deduct insurance payments from your home.

1. If you use your home or a portion of it for business purposes. You may be able to deduct the square footage of your qualified home office space (or the portion designated for working in) as a percentage of the total home square footage; you'd apply that percentage to your premium, and the resulting figure would be deducted as a business expense.
2. If you are a landlord and earn money from your rental property. Your homeowners insurance on the portion of the property that is used as a rental is now tax deductible. When you own several properties and only use them for rental income, all of your homeowners insurance is tax-deductible.

The Bottom Line

Homeowners insurance is required to protect your home, property, and possessions from fire, weather, theft, or liability. In fact, many lenders require you to have a policy if you are taking out a mortgage. So, even if it does not come with a tax break, homeowners insurance is worthwhile.