Make sure you pay attention to how you use your homeowner's insurance policy throughout the year; you may be able to get a break on your taxes. Here are the top three ways that most people benefit tax-wise from having homeowner's insurance:
Home Office Deduction
If you work from home and have a dedicated space in your home that you use only for the purpose of work, you may be able deduct part of your homeowner's insurance policy.
If you take an itemized deduction for your home office instead of a standard deduction, you can write off a portion of your homeowner's insurance policy. All you have to do is figure out total square footage that you use for your home business and divide that by the total square footage of your home. That number is the percentage of your home that you use for business. You can then deduct as part of your expenses that percentage of your homeowner's insurance policy.
For example, if you used 200 square feet of your 1,000 square foot home for business purposes, you would use .20 or 20% of your home for business uses. If you paid $1,000 a year in homeowner's insurance costs, you would be able to deduct $200 of those costs as an expense for your home office.
Another way your homeowner's insurance policy could help you out with your taxes is if you had any belongings that were stolen or damaged this year. If your insurance policy only covered a portion of their reimbursement, as generally happens when you have an actual cash value replacement policy, you can write off the deductible you had to pay as well as the remaining value of your belongings.
Casualty Loss Deduction
Finally, if your house or any of your belongings were damaged due to a natural disaster, accident or even a robbery, you can file a casualty loss tax deduction. Once again, this deduction comes into play when your insurance company does not fully reimburse you for these losses. You are able to deduct the money that had to come out of your own pocket to make up for these losses.
Although you cannot straight up deduct the cost of your homeowner's insurance policy from your taxes, there are situations where tax benefits associated with your homeowner's insurance policy do arise. If you work out of your home, you may be able to deduct part of the expenses of your policy. If something happens to your home or your belongings and you end up having to cover to replace or fix them, you will be able to write off the amount that came out of your own pocket.
For more information about home insurance, contact a company such as Parker Insurance Agency.