While your fire or homeowners’ insurance premiums may be included in your property payments, they are nondeductible expenses, according to the Internal Revenue Service (IRS). You cannot itemize any payments for insurance, including fire and comprehensive coverage, and title insurance, as deductions in your tax return.
Cases When You Can Deduct Homeowners’ Insurance
There are two instances in which you can deduct insurance payments from your home.
If you use your home or part of it for business, you may be able to use the square footage of your home space used for business as a percentage of the total home square footage to allocate to your homeowners’ insurance expense.
If you’re a landlord and claim rental income on your home, your homeowners’ insurance on the portion of the property used for rental becomes tax-deductible. When you own several properties and those properties are used only for rental income, then all of the homeowners’ insurance is tax-deductible.
Consult your tax preparer for more details on how to deduct homeowners’ insurance.
The Special Case: Private Mortgage Insurance
Premium payments for your private mortgage insurance (PMI) can be tax-deductible, and you can claim them on your tax return. If you are buying a home but can’t provide at least a 20% down payment of the home’s market value, PMI allows you to find financing and lenders to protect yourself against possible default.
The two requirements to deduct PMI from your taxes are that the insurance contract was issued after 2006 and that your adjusted gross income (AGI) on Form 1040, line 38, is less than $54,500 ($109,000 for married couples filing jointly).
We get these questions quite often regarding taxes and insurance. We always suggest you check with your accountant or tax preparer for a more focused answer for these good questions.
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[a portion of this blog post was taken from an article written by Damian Davila with www.investopedia.com.]