Buying an alarm system and paying for monitoring may be good for your safety and your peace of mind. It's not usually any good for your tax return. As with most costs of homeownership -- repairs, landscaping, buying a new microwave -- there's no tax cut for buying an alarm. However, if you rent out your property or have a home business, there may be exceptions where you can take a write-off.
If you have a home business, even if it's only part-time, you can write off a share of your home expenses. Say your business office is 9 percent of your home's floor space: You can write off 9 percent of mortgage interest, property taxes, utilities and also your alarm costs. You only get this deduction if your work space meets the requirements of the Internal Revenue Service. It should be the center of your business, and purely for business. Working next to your spouse on the couch doesn't count.
Deducting the Alarm
When you do your taxes, you report deductible home-business expenses on Form 8829. You transfer that amount to Schedule C, for self-employment income and expenses. If your business runs in the red, you can deduct losses from your other income, but not losses from the use of your home. Instead, you have to carry the home-business red ink forward to the next year and deduct them from your business income for that year.
If you rent out property, you get to write off a lot of the money you spend on it. Mortgage interest and property insurance are business expenses along with repairs and maintenance. Major improvements to the property have to be depreciated: You write off a little of the cost, year after year. The IRS counts security systems as an improvement rather than maintenance, so you probably won't be able to recover the full cost for years.
Writing Off Rentals
The IRS details the rules for depreciating a rental expense in Publication 527. You can write off improvements to rentals over either 27.5 years or 40 years. You report rental expenses on Schedule E, subtracting them from rental income. If you're active in managing the property, you can write off up to $25,000 in losses against non-rental income. Otherwise, you have to carry the loss forward to the next year and write it off then.
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