Homeowners insurance provides a safeguard for your home and personal property. But with the average homeowners insurance premium at $2,724 per year, you might be wondering if you can recoup some of those costs at tax time. Homeowners insurance generally isn’t tax-deductible, but you might be able to get a tax break from your home expenses in some cases.
Save on Home Insurance
- Personalized quotes in 5 minutes or less
- No signup required
Is your homeowners insurance tax-deductible?
Homeowners insurance premiums generally aren’t tax-deductible if the home is your primary residence. This is true whether you claim the standard deduction or itemize deductions on your tax return. Likewise, you typically can’t deduct payments for fire, theft, comprehensive coverage, mortgage, or title insurance.
“However, if a portion of your home is used for business purposes, you may be able to deduct a portion of the insurance premiums as a business expense,” says Elise Faucette, a certified public accountant.
What is a tax deduction?
You pay taxes on the money you earn, such as wages, salaries, and tips. But you might not have to pay taxes on the entire amount. A tax deduction lowers the amount of your income that’s subject to tax, which can reduce your tax liability.
Say you earned $50,000 during the year. If you can claim a tax deduction worth $2,000, then you’d subtract the $2,000 from your income and only owe taxes on $48,000.
When is your home insurance tax-deductible?
Homeowners insurance is tax-deductible in a few instances. If you rent out your home or run a business out of your home, you can typically deduct some or all of your insurance premiums. In some cases, you may qualify for a deduction if your property is damaged and your homeowners insurance claim is denied.
You run a small business out of your home
If you’re self-employed and regularly use part of your home as an office, then you may be able to claim the home office deduction. You can either take a simplified deduction or write off actual expenses, which include homeowners insurance and other home-related expenses.
The portion of your homeowners insurance premium that you can deduct is based on the percentage of your home, in square footage, that’s used for business purposes. So if your home measures 2,000 square feet and you regularly use 10% of that space as your home office, then you can deduct 10% of the amount you paid in homeowners insurance premiums.
How to Claim the Home Office Deduction
To claim this deduction, you’ll need to file Schedule C (Form 1040): Profit or Loss from Business.
You’re a landlord and receive rental income
Whether you rent out an entire property or just a room in your primary residence, you can write off some of the business expenses that come with being a landlord. Homeowners or condo insurance is one of those deductible business expenses.
You can claim the entire amount you paid for the annual insurance premium if you rented out the entire home. But if you just rented out part of the property, you can deduct the part of your expenses that applies to the rented portion. Landlords can also deduct the money spent on mortgage insurance, which is a type of insurance that protects the lender against default.
How to Claim Landlord Expenses
Claim these expenses on Schedule E (Form 1040): Supplemental Income and Loss.
You submitted a theft or loss claim that was denied
The casualty and theft loss deduction allows you to write off losses if your property is damaged and some or all of your insurance claim is denied. To qualify, the losses must result from a sudden, unexpected event during a federally declared disaster. You’ll also need to itemize your deductions on Form 1040, Schedule A.
You may deduct either the entire loss or a portion of it, based on what your homeowners insurance company covers. For instance, say a tree falls on your home during a hurricane, and the storm is considered a federally declared disaster. The repairs cost $6,000, but your insurance company will only cover $4,000. The $2,000 personal casualty loss is the tax-deductible portion. You may also need to adjust the deduction based on your income and other factors.
How to Claim the Casualty and Theft Loss Deduction
To claim this deduction, follow the IRS Instructions for Form 4684.
Learn More: How to Prepare Your Homeowners Insurance for a Hurricane Claim
What about mortgage interest deductions?
The interest portion of your monthly mortgage payments is tax-deductible, whether it’s for your primary residence or rental property. But you must meet some eligibility requirements. First, you have to itemize your tax deductions on Schedule A instead of taking the standard deduction. The deduction is also limited by the amount of your home loan and the date you closed on the mortgage.
If you took out your home loan after Dec. 15, 2017, you can deduct the full amount you paid toward interest on the first $750,000 of your mortgage debt ($375,000 if married filing separately). For loans originated on or before that date, interest is deductible on loan amounts of up to $1 million ($500,000 if married filing separately).
What are some other common home tax deductions and credits?
Homeowners can take advantage of several other tax breaks:
Property taxes: Homeowners can deduct up to $10,000 paid toward property taxes and either income taxes or sales taxes on the local level. To take the deduction, you’ll need to itemize on Schedule A.
Capital gains: If you sell your primary residence, you can avoid capital gains taxes on up to $250,000 of profit ($500,000 for joint filers). To qualify, you’ll need to have lived in your home for at least two out of the five years before its sale.
Accessibility home improvements: If you installed healthcare equipment in your home, made medically necessary home improvements, or made your home more accessible, you can deduct those expenses on your tax return.
Energy-efficient features: Homeowners can claim federal tax credits for installing energy-efficient improvements and purchasing efficient heating and cooling equipment. Some states are also launching rebate programs for energy-efficient improvements. For more details and updates, check the federal government’s Clean Energy for All website.
Save on Home Insurance
- Personalized quotes in 5 minutes or less
- No signup required
Home insurance tax deduction FAQs
Here are answers to some commonly asked questions about homeowners insurance and tax deductions.
Homeowners or condo association fees that you pay on a primary residence aren’t tax-deductible. But if you use a home as a rental property, then you can claim HOA fees as a business expense and deduct them. If you only rent out part of your home, then you can deduct a portion of the fees.
The percentage of your homeowners insurance premium that’s deductible is based on the percentage of your home that’s used for business purposes. If your home measures 2,000 square feet and your home office is 200 square feet, then 10% of your home is used for business. That means you can deduct 10% of your homeowners insurance premiums. If you paid $1,200 toward homeowners insurance during the tax year, for instance, then you may deduct 10% of that amount, or $120.
Private mortgage insurance is a type of insurance policy you may need if you get a conventional home loan and put down less than 20%. PMI payments on primary residences are no longer tax-deductible. But landlords can claim PMI payments as a deductible business expense on a rental property.
Yes, homeowners who itemize their tax returns can deduct mortgage interest payments and up to $10,000 paid toward property taxes. Homeowners who sell their homes can also avoid capital gains taxes on up to $250,000 in profit ($500,000 for joint filers). Tax credits are also available for homeowners who install energy-efficient features in the home.
Landlords can claim homeowners insurance premiums and mortgage insurance paid on their rental properties. Self-employed people can also deduct a portion of their homeowners insurance premiums by claiming the home office deduction.
- IRS.gov. "Know what’s deductible after buying that first home, sweet home." Accessed February 23, 2023
- IRS.gov. "Business Use of Home." Accessed February 23, 2023
- IRS.gov. "Tips on Rental Real Estate Income, Deductions and Recordkeeping." Accessed February 23, 2023
- IRS.gov. "Helpful tips for deducting casualty and theft losses." Accessed February 23, 2023
- IRS.gov. "Publication 936 (2022), Home Mortgage Interest Deduction." Accessed February 23, 2023
- IRS.gov. "Sale of Your Home." Accessed February 23, 2023