Is Homeowners Insurance Tax Deductible in 2020?
Is Homeowners Insurance Tax Deductible in 2020?

Is Homeowners Insurance Tax Deductible in 2020? Typically, no. But, in some cases, it is.

Your homeowners insurance is NOT tax-deductible if you are a standard W2 employee working at your company's location, and you have no other side gigs or businesses.

However, there are numerous circumstances when you CAN claim your homeowners insurance on your taxes. If you were eligible but did not itemize this deduction in previous years, you can amend your past tax returns by filing IRS Form 1040X.

Of course, there are caveats, and you should consult your Certified Public Accountant (CPA) about your circumstance.

Who CAN Claim Homeowners Insurance on Taxes?

Do you use part of your home as a small business or place to work? Do you store business inventory in your residence? Do you rent out real estate, or are you renting a room? If you answered yes to any of these questions, you could deduct part of your home insurance premiums if you file taxes as a:

  • statutory W2 employee
     
  • standard W2 employee with the classifications: armed forces reservist, qualified performing artist, an employee with impairment-related work expenses, fee-basis state or local government official, or eligible educator
     
  • self-employed worker
     
  • sole proprietor
     
  • independent contractor
     
  • husband & wife joint venture
     
  • real estate owner renting out property
     
  • homeowner renting out a room
     
  • home-based daycare business
     
  • partner or owner in an LLC or sub S or B or C corporation
     
  • person storing business inventory or product samples
     
  • W2 standard employee who also classifies as one of the above

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Whether you have a dedicated office with four walls or space(s) where you work in your home or store business inventory, you can write off business expenses on your taxes, and one of those expenses is homeowners insurance.

Your allowable homeowners insurance tax deduction equals the same square footage calculation you used for all other home-related business expenses. For example, if your home is 2,500 square feet and 375 square feet (15%) of your home is for a workspace, you may deduct 15% of all your home-related business expenses, such as:

  • mortgage interest
     
  • property taxes
     
  • casualty losses from a federally declared disaster
     
  • utilities
     
  • homeowners insurance premiums

Therefore, if you pay $1,000 a year in insurance payments, the IRS allows you to reduce that tax year's taxable income by $150.

Some add-ons, like hazard insurance, are also included in expenses you can deduct.

The following table lists the circumstances when you can get a tax deduction for your home insurance premiums and the IRS forms to file. Check your eligibility:
 

EMPLOYMENT CLASSIFICATION IRS FORMS TO REPORT INCOME & PAY TAXES IRS TAX FORM TO DEDUCT HOMEOWNERS INSURANCE PREMIUMS
You are a Standard W2 Employee, and you have income or losses through one of the business entities below.

Your income is reported to the IRS by your via a W2, and they send a copy to you.
 

You file a 1040 or 1040-SR (for seniors) to pay your taxes or get a refund.

See below

Standard Employees Classified as:
 

- Armed Forces Reservists

- Qualified Performing Artists

- Fee-Basis State or Local Government Officials

- Employees with Impairment Related Work Expenses

- Eligible Educators

Your income is reported to the IRS by your via a W2, and they send a copy to you.
 

You file a 1040 or 1040-SR (for seniors) to pay your taxes or get a refund.

Form 2106
Statutory Employee

Your income is reported to the IRS by your via a W2, and they send a copy to you.

You file a 1040 or 1040-SR (for seniors).

Schedule C or C-EZ.

Independent Contractor
 

Self-Employed

Your employer(s) reports your income to the IRS via a 1099-MISC.

 

You file a 1040 or 1040-SR (for seniors).

Form 8829 with Schedule C or C-EZ.

Sole Proprietor

 

Husband & Wife Joint Ventures

You file a 1040 or 1040-SR (for seniors) with Schedule E, F, J, or SE. Form 8829 with Schedule C or C-EZ.
Real Estate Owner with Rental Property You file a 1040 or 1040-SR (for seniors) with Schedule E Schedule C or C-EZ.
Partner or Owner of an LLC

Your company reports business income on Form 1065 (multiple-member LLCs) & each owner's income on Schedule K-1.
 

You file Form 1040 with Schedule E, F, J, or SE.

Form 8829 with Schedule C or C-EZ.
Partner or Owner of a Sub-S Corporation

Your company reports business income on Form the 1120S & each owner's income on Schedule K-1.

 

You file Form 1040 with (single-member LLC & partners) Schedule SE.

Form 8829 with Schedule C or C-EZ.
Storage of Inventory or Product Samples. Use the corresponding form above. Form 8829 with Schedule C or C-EZ.
Daycare Form 1040 or 1040-SR Form 8829, Part I, Schedule C

Qualifications for Claiming Home Insurance Premiums

To qualify to deduct your homeowners insurance premiums as business use of your home, you must use a section of your home:

  • As your exclusive principal place of business
     
  • As space where you meet or deal with patients, clients, or customers in the ordinary course of your trade or business
     
  • A separate structure unattached from your home, and is concerning your trade or business
     
  • Regularly for specific storage use
     
  • For rental use
     
  • As a daycare facility

Other Qualifying Circumstances

Boarders
If you rent a room to others, part of the homeowner's insurance premium is tax-deductible. This deduction uses the square footage method mentioned above that you would for office space in your home.

Disasters
Some losses are deductible in federally declared disaster areas. For example, if your claim is only partially paid, you can deduct the portion not paid by your insurance company.

Auto Insurance Premiums
You are also entitled to a tax break on your car insurance that covers vehicles used in your business. You cannot deduct car insurance premiums if you claim gas mileage.

At your service,
Young Alfred

Article Sources

  1. IRS. "Publication 587 Business Use of Your Home." Principal Place of Business. Page 3. Accessed May. 20, 2020.
  2. IRS. "Publication 587 Business Use of Your Home." Storage of inventory or product samples. Page 3. Accessed May. 20, 2020.
  3. IRS. "Publication 535 Business Expenses." Deductible Premiums. Chapter 5. Page 20. Accessed May. 20, 2020.
  4. IRS. "Publication 527, Residential Rental Property." Deductible Premiums. Chapter 1. Page 3. Accessed May. 20, 2020.
  5. IRS. "Publication 587 Business Use of Your Home." Qualifying for a Deduction. Page 3. Accessed May. 20, 2020.
  6. IRS. "Publication 587 Business Use of Your Home." Using Actual Expenses. Page 6. Accessed May. 20, 2020.
  7. IRS. "Simplified Option for Home Office Deduction." Accessed Jan. 5, 2020.
  8. IRS. "Instructions for Schedule C." Line 30. Page 1. Accessed May. 20, 2020.
  9. IRS. "Instructions for Form 8829." Accessed May. 20, 2020.
  10. IRS. "Publication 587 Business Use of Your Home." Partners. Page 19. Accessed May. 20, 2020.
  11. IRS. "Publication 587 Business Use of Your Home." Daycare Facility. Page 13. Accessed May. 20, 2020.
  12. IRS. "Publication 529, Miscellaneous Deductions." Deductions for Unreimbursed Employee Expenses. Categories of Employment. Page 2. Accessed May. 20, 2020.
     

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her attorney, business advisor, or tax advisor concerning matters referenced in this post. Young Alfred assumes no liability for actions taken in reliance upon the information contained herein.