By Josh Anish on April 11th, 2012 in Consumers
In an earlier post we examined whether you could write-off car insurance on your taxes, now we look at the same question for homeowners insurance.
Most folks in the housing market know all about the tax benefits of taking out a mortgage on a home. In short, whatever interest accrues on your mortgage can be deducted from your annual income. So, for example, if your mortgage collected $10,000 of interest over the year and you made $70,000 during that same period − you’re taxed as if you earned $60K.
Homeowners insurance is an entirely different bird from your mortgage interest when it comes to taxes. It is much more similar to car insurance because, in almost all cases, you cannot claim it as a deduction.
There are a few exceptions, however. Those who use their homes as their primary places of business can claim a deduction. Whatever your percentage of expenses endured from operating a business from home compared to your total home expenses − that fraction of your homeowners insurance outlay for the entire year can be written off.
Another subset of homeowners who can write off their insurance are those who own rental properties. These folks must first get the right type of insurance, a policy that caters to those who own property used almost exclusively for rentals.
We generally recommend caution when writing off homeowners insurance. For the most part, the IRS doesn’t look fondly upon it. Yes, there are the exceptions enumerated above but those themselves have caveats and nuances that need to be explored thoroughly beforehand.
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