Home ownership provides a number of benefits, not the least of which is the ability to get some major tax deductions. The deduction for mortgage interest is one of the largest deductions most people who itemize their deductions take, according to the Urban Institute. You can also deduct your state and local property taxes, but most other costs of maintaining and running your home, including property insurance premiums, are not tax deductible.
Your house payment might include more than just payments for your mortgage loan. Most lenders require that. along with principal and interest, you include amounts for state and local property taxes, property insurance and private mortgage insurance. You can deduct your interest payments and your state and local property taxes. The tax deduction for private mortgage interest expired as of the end of 2011, unless Congress votes to reinstate it. Any amounts you paid for property insurance are not tax deductible.
Casualty, Disaster and Theft Loss
Property insurance, when purchased to cover your home, is usually referred to as homeowner's insurance. It covers you against financial loss due to covered theft, casualty or disasters, which might include fires, burglaries and windstorms. If you don't have property insurance, you usually can deduct such losses on your federal income tax return. If the loss was not fully covered by your property insurance policy, you might be able to deduct the amount that wasn't reimbursed, provided you filed a timely claim.
Business Property Insurance
If you buy property insurance for a rental home or for your business, the IRS considers your premiums to be a deductible business expense. You can deduct premiums for property insurance that covers your business against loss from fire, theft, accident, storms or similar losses. You can deduct property insurance premiums for your vehicles that you use for business purposes. If you use your car for both personal and business, you can deduct the portion of your premium that corresponds to the percentage of business use of your car.
You have to itemize your deductions if you want to claim your home mortgage interest and real estate taxes, but you can deduct your business property insurance costs regardless of whether you itemize your deductions or claim the standard deduction. Report your business expenses, including the cost of your business property insurance, on Schedule C of IRS Form 1040.
Video of the Day
- Internal Revenue Service: Publication 530, What You Can and Cannot Deduct
- Internal Revenue Service: Topic 515 - Casualty, Disaster, and Theft Losses (Including Federally Declared Disaster Areas)
- Fox Business: Can I Deduct My Insurance? Well, it Depends
- IRS: Publication 535, Deductible Premiums
- Urban Institute: Reforming the Mortgage Interest Deduction
- Tax filing gone wrong: this accountant has had enough. image by Alexey Stiop from Fotolia.com