Of all the seasons of the year, tax season is arguably the one that causes the most headaches. Many enlist a professional to help them through the process, but if you do your taxes on your own, it can be overwhelming. Even if you are expecting a return, the process of sifting through your receipts and trying to figure out what you can deduct and what you cannot is mind-boggling. Often the question comes up -can I deduct my home insurance costs from my taxes? Through identifying situations where your home insurance payments are deductible and situations where they are not, you will be able to answer that question for yourself. Of all the seasons of the year, tax season is arguably the one that causes the most headaches. Many enlist a professional to help them through the process, but if you do your taxes on your own, it can be overwhelming. Even if you are expecting a return, the process of sifting through your receipts and trying to figure out what you can deduct and what you cannot is mind-boggling. Often the question comes up -can I deduct my home insurance costs from my taxes? Through identifying situations where your home insurance payments are deductible and situations where they are not, you will be able to answer that question for yourself.

 

Standard Home Insurance

 

Firstly, it is essential to state that most are not going to be able to deduct their insurance premiums from their taxes.  Standard homeowners’ insurance payments are considered a non-deductible expense by the IRS. Even though your insurance payment is often bundled together with your mortgage and you can deduct the interest costs of a mortgage, that does not apply to insurance premiums. For the average homeowner, home insurance premiums are just the standard course, and you must pay them without being able to deduct them.  However, there are a few situations in which all or portions of what you pay for your homeowner’s insurance is considered tax deductible.

 

Home Office

 

The first situation in which you can deduct a portion of your Homeowners insurance from your taxes is if you have a home office that you use for your business. Similar to how you can deduct the rent or mortgage for the square footage that your office occupies; you are also deduct the portion of insurance premium that covers the home office. You would calculate this the same way you would calculate the rent for the home office.  If you figure out the percent of your home that the home office occupies and apply that percentage to the insurance premium, you will have calculated the amount that is deductible. For instance, if your home office occupies 10% of your house and the insurance premium on your home is $1000 per year, you can deduct $100 of your Homeowners insurance premium as insurance on your home office.

 

Rental Income

 

If you are a landlord, you are also able to deduct some of your insurance premiums. If a portion of the home that you live in is rented out, you can deduct the percentage of the home insurance cost that belongs to the rental. For all other properties that you own and rent to others, you can deduct the entire cost of insurance from your taxes.

 

Private Mortgage

 

Insurance While, with only those two exceptions, you cannot deduct the cost of Homeowners insurance from your taxes, there is one other similar expense you can deduct. If you pay for private mortgage insurance on your home, you can deduct those costs. Homeowners insurance and mortgage insurance are two entirely different things. Homeowners insurance helps protect you and your home; Private mortgage insurance helps protect your mortgagee. The insurance is devised to help the mortgage company recoup the costs if you default on your loan. Rather than an insurance you opt to buy for yourself, mortgage insurance is something that is often required by your lender if they feel you are high-risk. In particular, borrowers who are not able to put at least 20 percent down on the loan will often be required to carry mortgage insurance.  While being required to carry mortgage insurance in itself can be a bit of a downer as it adds another cost onto your mortgage payment, there is the silver lining in the fact that it is entirely tax deductible currently. However, this deduction may soon be disappearing as well.

 

Again, while most will not be able to deduct the cost of their insurance premiums from their taxes, there are a few situations where it is possible to do so. With the education of what insurance you can deduct and which you cannot, you can head into the next tax season a little more prepared.