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Is Homeowners Insurance Tax Deductible?

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UPDATED: Mar 13, 2020

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Insurance Q&A: “Is homeowner’s insurance tax deductible?”

The true cost of owning a piece of property is often substantially higher than just your monthly mortgage payment. The two biggest additional costs come in the form of property taxes and insurance.

And while the continuation of the mortgage interest tax deduction is currently up in the air, for the time being it can still be deducted from your taxable income. Keep your fingers crossed on that one if you’re a homeowner. Even if it’s kept intact, it may be reduced.

But what about a deduction for those costly homeowners insurance premiums? Not so fast. There is currently no tax deduction available for this common expense. You are simply “out” the money for personal homeowner’s insurance costs as far as good old Uncle Sam is concerned.

What Property Insurance Is Tax Deductible?

However, property and homeowners insurance may be tax deductible in certain instances. Namely, when the insurance premiums are being incurred as part of a business venture. The two most common examples of when home and property insurance are tax deductible are landlord policies and home businesses.

Landlord/Rental Properties – Being a landlord is a business venture. As a result, almost all of the expenses associated with operating your “business” qualify as tax deductions…landlord’s insurance policy premiums included.

Home Businesses – There are some instances in which you can deduct part of your personal homeowner’s insurance premiums for a home-based business. We’re not talking your “computer room” here. You must have a legitimate home office and be self-employed.

You may lease a certain portion of your personal home to your business to help qualify for this deduction. Ultimately, your business may write a monthly check to you in order to occupy the space in your home. But be careful with this one. Consult a tax advisor before you file to ensure you are not red-flagging yourself for an audit by trying to cheat the IRS!

Private Mortgage Insurance (PMI) – You may also qualify for a tax deduction on PMI, which is necessary if your mortgage loan was more than 80% of the value of your home when it was purchased. Again, consult your tax advisor before attempting any such deduction.

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The Good News?

Okay, so we know you’re probably bummed that homeowners insurance premiums generally can’t be deducted on your income taxes.

But it’s not all bad news. If you happen to file an insurance claim, which likely isn’t good news, for what it’s worth, claim payments you receive from your insurer are generally not taxable.

And hey, it probably wouldn’t be worth getting the small tax deduction on your homeowner’s insurance premium if you had to trade that for a tax on a property claim settlement, which could end up costing you thousands of dollars on a large enough claim!

Read more: Is car insurance tax deductible?

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