Is homeowners insurance tax deductible?

Homeowners insurance is essential for protecting your belongings in case of an accident. Unfortunately, you can’t deduct your homeowners insurance premiums in most cases. There are a couple of exceptions though, like for some people who work from home and those who rent out some or all of their home. There are also a handful of other federal tax deductions available to homeowners.

Can you deduct homeowners insurance premiums on your taxes?

You can’t deduct homeowners insurance premiums on your federal taxes, with two key exceptions: your home is your primary workplace or you rent out your home.

So in general, most homeowners won’t be able to deduct home insurance. The IRS treats it as a more or less voluntary cost, even if your mortgage lender requires it. However, the IRS is a bit more lenient when it comes to deductions for business-related expenses.

Who can take the home office deduction?

Using your home as your primary workspace or place of business makes you eligible for the home office deduction. Most workers won’t qualify unless their home office is their primary place of business. Workers who go into an office some of the time and work from home some of the time aren’t eligible due to changes implemented under the Tax Cuts and Jobs Act of 2017.

Areas that can qualify as a home office include your whole home, a single room, or even just a corner of a single room. The key is that the space is only used for a business. A spare room that you work in but that guests sometimes sleep in wouldn’t count as a home office.

With the home office deduction, you can treat a variety of costs, including utilities, repairs, and homeowners insurance, as deductible expenses. You can claim the home office deduction by  completing Form 8829 and Schedule C of Form 1040.

→ Learn more about home office deductions

Who can deduct rental expenses?

Using your home as a rental property also opens you up to business expenses related to rental income. Your home could qualify whether you rent out the whole house or just a portion of it. For example, renting a single room or a garage still counts. Using a renting platform like Airbnb counts just as independently managing your rental.

The most important factor is that you can’t also use the space for yourself. It no longer qualifies for the rental deduction if you live in the rental space or use it for personal purposes for more than 14 days, or for more than 10% of the total days that it was rented out to others, whichever of those two numbers is higher.

If you do have a qualified rental space, you can use Form 1040 Schedule E to deduct homeowners insurance and other expenses like utilities, maintenance costs, and management fees.

→ Learn about tax deductions on a second home

What homeowner expenses are tax deductible in 2023?

While you likely can’t deduct homeowners insurance, there are other common expenses you may be able to deduct when you file your taxes in early 2023. Here are 7 tax deductions and credits that homeowners may be able to claim on their federal taxes:

• Mortgage interest and points: These qualify for an itemized deduction. You can only deduct interest on the first $750,000 of a mortgage since 2017. Your points also aren’t deductible all at once.
• Home equity loan interest: You can deduct interest from a home equity loan just like regular mortgage interest but because of the Tax Cuts and Jobs Act of 2017, you can only deduct this interest if the loan was used to buy, build, or improve your home.
• Property taxes: Up to $10,000 of state and local taxes are deductible on your federal taxes, including property taxes. This limit was created in 2017, and previous tax years allowed limitless deductions.
• Capital gains for a home sale: Money from selling a house is taxable as a capital gain, but married couples can deduct up to $500,000 of that income and single filers can deduct up to $250,000.
• Accessibility improvement costs: Any medically necessary improvements that you make for yourself, a spouse, or a dependent is deductible. These costs are also deductible for rental properties.
• Energy efficiency tax credits: While technically tax credits instead of deductions, you can get tax benefits if you installed or used renewable energy on your property. Improvements like more energy efficient doors, insulation, and heating systems also qualify for a credit.
• Casualty and theft losses: You can deduct casualty and theft losses as an itemized deduction, but only if they occurred in a federally declared disaster. The deduction applies to property that’s significantly damaged, fully destroyed, or stolen. Only the amounts beyond your other insurance coverage can qualify.

For homeowners who’ve filed taxes in previous years, it’s helpful to know that the deduction for homeowners insurance premiums is no longer available. The deduction expired at the end of 2021, so you can’t claim it on your 2022 tax return.  

How does homeowners insurance work?

Homeowners insurance covers internal and external damage to your home, damage to your personal belongings, and injuries to people on your property. And while it isn’t legally required, your mortgage lender may require you to maintain an active policy.

When there’s damage that’s covered by your home insurance policy, you need to file a claim with your insurance company. The insurer will need a report of what happened and in the event of damaged property, they’ll need to know the value of the property. The insurance company may also seek to carry out their own assessment of the damage.

When you file an insurance claim, you’ll need to pay a certain amount before your insurance will pay for anything. The amount you pay is known as your deductible. Beyond the deductible, your insurer will then cover the cost of the damage up to a certain limit, which could vary based on your claim.  For example, the insurer will pay up to a different amount for an injury to one person versus an injury to multiple people or an injury that results in death.

Check the terms of your insurance policy to see how much your deductible is and how much your insurer covers for injuries or property damage.

What does homeowners insurance cover?

Exact policies vary but homeowners insurance generally covers injuries and damage that occur in your home or elsewhere on your property. Some examples of what is covered include damage from fire, floods, burst pipes, earthquakes, fallen trees, theft, and vandalism.

On the other hand, breaking something during regular usage isn’t covered. As an example, dropping a plate or knocking over a cabinet wouldn’t be eligible. Injuries under similar circumstances also aren’t covered. So if you are walking through your house, trip, and fall down the stairs, your homeowners insurance most likely can’t help you.

Other common things that your homeowners insurance won’t pay for include damage caused by pets or children, termite or insect damage, normal wear and tear, and damage to plants or trees caused by natural means.

→ Learn more about when you should buy homeowners insurance

How much does homeowners insurance cost?

The average homeowner should expect to pay up to $2,000 per year or about $150 per month for homeowners insurance, though how much you pay depends on multiple factors.

Where you live is a major determinant in how much you pay for home insurance. In less expensive areas, you could be paying closer to $1,000 per year for insurance. Meanwhile, more expensive markets may have prices above $2,000 per year.

Certain details about your house will also affect your home insurance, like the age of your home, the materials and structure of your house, and the price of your home. Personal information, like your marital status, credit scores, and your claims history also have an impact on price. Plans that offer lower deductible or higher coverage amounts (meaning your insurer pays more in the event of a claim) will also cost you more.