Home Insurance Articles
Tax Deductions Made Available To Those With Home Insurance
2010-07-17
Most home insurance quotes do not provide any recourse, information, or advice on obtaining a home owners insurance tax deduction. Without a doubt, under normal circumstances, home owners insurance premiums are not tax deductible although these expenses can be a consequential amount of the monthly financial budget. These deductions are considered in the same way that mortgage payments are viewed; they are consistent with the responsibilities and expenses of owning a home and cannot be deducted on annual income tax return. It has been aptly stated, and is apparently valid, that there is an exception to every rule.
Actually, there are two methods that can be utilized that will render home owners insurance premiums deductible. First, if the home is used as a rental property, the home insurance premiums are completely deductible. Second, if the home owner uses a portion of the home as a home office, a comparable portion of the home owners insurance premium costs is deductible. These exceptions validate the old adage: "where there is a will, there is a way." Therefore, it is important to be apprised of the tax laws and comprehend the ramifications contained in same to benefit from the available tax reliefs.
The realized rental property income is usually sufficient to cover any mortgage payments, some repairs, home association dues and insurance coverage. It is important to confirm with the insurance agent that provides home insurance quotes the importance of retaining evidence of payment for the home insurance premiums that indemnifies the owner against liability. This small step is critical and translates into a sizable deduction on Schedule E of the 1040 form. Insurance premiums on rental property are deducible and can save hundreds of dollars.
Home owners with a home office or who are self-employed are entitled to a tax deduction because they are indemnified by a home owners insurance policy; the home office is included in that coverage. Again, keeping receipts is critical for calculation of the percentage of the total insurance premium that insures the portion of the home that is used exclusively as a home office. For example, if the home insurance quote for a home with 2,000 square feet costs $1,500 per year. The space that is used for the home office measures 200 square feet (10% of the home). To calculate the amount of the deduction, multiply the amount of the annual premium by 10% (1,500 X 10); the tax deduction would be $150.00. This is a simplified example, but this deduction can be significant and incrementally reduce the amount of outstanding taxes due at the end of the year.