Is Homeowners Insurance Tax Deductible?

Even if your premiums are included as part of your mortgage payments in an escrow account, you can’t deduct them. However, there are certain scenarios when homeowners insurance may be tax deductible.

A tax deduction reduces your adjusted gross income, which in turn reduces the amount you have to pay in taxes. There are two major types of deductions: standard and itemized. Standard deductions depend on how you’re filing (single, married and filing jointly, married and filing separately, or as a head of household). 

Itemized deductions are expenses you may incur that reduce the amount of adjusted gross income you take in. Interest on your mortgage, unreimbursed medical expenses, and some local and state taxes are considered itemized deductions.

You may be thinking that your homeowners insurance premium could qualify as one of these, too. But, unfortunately, it doesn’t in most cases. There are a few exceptions we’ll mention below, though.

You may be eligible for some insurance-related tax discounts if you rent out part of your home, if you have a home office, or if you make some home improvements to your house, such as adding a swimming pool. However, these may change your insurance needs.

For example, adding a swimming pool may increase your homeowners insurance rate in the coming years, so it might eventually offset the tax break you get for writing its addition off as an expense.

If your home office is used regularly and exclusively as your principal place of business, you can write off some home expenses like insurance, utilities and repairs as business expenses. This is possible for homeowners and renters, meaning homeowners insurance or renters insurance could be deducted in this case.

In rare cases, you can deduct insurance-related losses from your taxes. Typically, theft and other property damage can’t be deducted. But, if your home was damaged by severe weather, such as a hurricane or flood, and your location was determined to be a disaster area by the federal government, you can write off some losses that you didn’t receive any insurance coverage for.

For example, if you suffered $300,000 worth of damage to your home after a flood, and your NFIP insurance policy paid you $250,000, their typical policy limit, you may be able to write off an amount close to the $50,000 that you weren’t reimbursed for as long as you’re in a federal disaster area. 

The specifics are a little wonky, as you have to subtract a $100 flat fee and some of your adjusted gross income when doing this, but know that you’re entitled to deduct some of your unreimbursed losses on your taxes in a case like this.

Insurance premiums that you pay on a property you rent to tenants can be deducted from your taxes. In this case, your insurance qualifies as a business expense. If you own separate property and rent it out, you can write off your landlord insurance premium. If you rent out part of the home you live in, you may be able to write off part of your homeowners insurance that applies to the area you’re renting out.