Everyone wants to maximize their tax deductions. The Internal Revenue Service (IRS) has no problem with legitimate deductions. Other so-called deductions, however, don't fit into that category. Taking a deduction for homeowners insurance may or may not be acceptable, all depending on how you use the house. If the house insurance is on a rental, then deducting it is different than if the insurance is on your residence.
If you try to deduct your homeowner's insurance on your residence, you might receive a note from the IRS within a few months indicating the deduction was disallowed. Homeowner's insurance on your personal residence isn't deductible if you have no business in the home or don't rent out part of the residence.
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People who own a rental know that insuring the property is a necessary business expense, and so does the IRS. If you own a rental, the insurance on the rental is deductible. At the minimum, you can deduct the expense to offset any rental income. There are restrictions on the amount of the deduction if you have a high income and your participation is passive, meaning you don't actually participate in any facet of the renting, just the financing.
Office in the Home or a Home as Your Office
People who use a portion of their home for a business may be able to deduct a portion of the insurance. If you have a rider on your policy to cover the business, the cost of the rider is tax-deductible from your business income. If you have an office in the home, you can deduct a percentage of the policy cost from the business income. If you use one-tenth of the house for your office, for example, then you can deduct one-tenth of the premium. If you use an entire house strictly to serve as your office, you can deduct the entire cost of the house insurance.
If You Have a Boarder
For people who rent a room to others, part of the homeowner's insurance premium is also tax-deductible. Similar to the office in the home, you have to calculate what your personal area is and what portion of the house is for income production from the renter. If the tenant rents one bedroom in a six-room house, you can deduct one-sixth of the insurance premium from the rent you receive.
Where to Deduct
For people who are self-employed and file a Schedule C, you'll need to use Form 8829 if you have an office in the home. The results of this form, Expenses for Business Use of Your Home, then goes on line 30 of Schedule C. If you can't use Schedule C for your business, because it's a hobby business, use schedule A, itemized deductions and the section on miscellaneous deductions to report the expense. People who rent houses need to use Schedule E to report the house insurance on the rental.