The IRS (Internal Revenue Service) allows homeowners to deduct mortgage interest on their income tax returns. You may be wondering: Can you deduct house insurance on your taxes? Is flood insurance tax-deductible? There are specific rules for homeowners and landlords about deducting these types of insurance.
Is Home Insurance Premium Tax-Deductible?
The answer to this question is yes, in some cases. Homeowners who live in their primary residence usually can't deduct the cost of home insurance on their income tax returns. Although it is a necessary cost for living in the home, it isn't tax-deductible.
Homeowner Who Rents a House
The situation is different if a homeowner owns a house that is rented to tenants. In that case, it is treated as a rental property. The homeowner, as a landlord, can deduct their expenses incurred against the rent they receive from the tenant.
The house insurance is one of the expenses incurred by the homeowner acting as the landlord. The home insurance premium is tax-deductible.
Apartment Building Landlords
Apartment building landlords should have business property insurance in place. This type of coverage protects against losses to the building from fire, theft, storms and vandalism. It covers damages caused by tenants.
Landlord insurance provides liability coverage in case someone is injured while visiting the property. It also covers the landlord for lost rental payments when repairs to the property result in a temporary vacancy. Landlord insurance premiums are tax-deductible.
Is Flood Insurance Deductible on Income Tax?
A homeowners insurance policy usually doesn't cover flood damage. To obtain flood insurance coverage, a homeowner would need to buy a separate insurance policy specifically for flood insurance. In any case, flood insurance isn't deductible on income tax.
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When Is Flood Insurance Tax-Deductible?
Business insurance generally doesn't cover losses due to flooding. Flood coverage is available through a special rider from the insurance company. Business insurance is tax-deductible. If an apartment building landlord adds the flood insurance rider to the business insurance policy, then the flood insurance coverage would be tax-deductible as a business expense.
What Does Flood Insurance Cover?
Flood insurance coverage insures against physical damage to the building and personal property. Homeowners' flood insurance policies typically have $250,000 limits for the home and $100,000 for personal property with a $500 deductible. Business insurance policies are generally written for $500,000 coverage for the building and $500,000 for personal property damage, with a $1,000 deductible.
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Types of Losses Not Covered by Flood Insurance
There are several types of losses that are specifically excluded from flood insurance policies, including:
- Moisture or mildew damage that could have been avoided by the owner
- Erosion losses
- Access to the property
- Temporary housing costs
- Property outside the building (plants, septic systems, walks, decks, fencing, hot tubs, boat docks, swimming pools, boathouses)
- Cars
- Currency, stock certificates and precious metals
Flood insurance doesn't cover everything located in basements. Examples of these items are:
- Drywall in the walls and ceiling
- Carpeting, tiles and area rugs
- Paneling, bookcases, curtains and blinds
- Staircases and elevators (in some cases)
- Most types of personal property (clothes, electronics, furniture, kitchen supplies)
Homeowners and apartment building landlords who want to buy flood insurance coverage should consult with a knowledgeable insurance agent. The agent can advise them on the best level of coverage for their situation. Consumers should also keep in mind that flood insurance generally takes about 30 days to go into effect from the date of purchase. This information may impact when a buyer makes a decision about coverage.
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