{"id":28591,"date":"2021-12-15T11:52:13","date_gmt":"2021-12-15T19:52:13","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=28591"},"modified":"2021-12-15T11:52:13","modified_gmt":"2021-12-15T19:52:13","slug":"buyer-is-homeowners-insurance-tax-deductible","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-is-homeowners-insurance-tax-deductible\/","title":{"rendered":"It’s Tax Time! Can I Deduct My Homeowners Insurance?"},"content":{"rendered":"

You just bought your first home this year, and as tax season approaches, you might be wondering if any of the expenses that come with homeownership are tax deductible<\/a>. You probably already know that certain items are \u2014 such as the interest portion of your monthly mortgage payment, but what about other expenses? In particular, what about homeowners insurance?<\/p>\n

While homeowners insurance isn\u2019t one of the biggest expenses you\u2019ll incur, it isn\u2019t necessarily inexpensive<\/i>, either. According to a survey by Statista.com, average homeowners insurance rates were $1,249 per year as of 2018<\/a>, a fairly big increase from an average of $536 per year in 2001.<\/p>\n

Since this is something that is part and parcel of owning a house, you might wonder if any or all of your monthly homeowners insurance payments are tax deductible.<\/p>\n

The short answer is: usually, your homeowners insurance is not<\/b> tax-deductible<\/a>, but the longer answer is\u2026well, complicated. There are <\/i>instances where you can deduct at least a portion of your homeowners insurance.<\/p>\n

Because it\u2019s a bit more convoluted than your standard tax deduction, we consulted the experts. We spoke with experienced real estate agents who are in the know when it comes to homeowners insurance, as well as tax professionals who can share their expertise and knowledge about tax deductions, how they work, and whether or not you can ever deduct your homeowners insurance.<\/p>\n

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Source: (Garrett Butler \/ Unsplash)<\/figcaption><\/figure>\n

What is homeowners insurance?<\/h2>\n

Homeowners insurance, which is required by mortgage lenders<\/a> (and always recommended even if you pay cash for a house), is similar in some ways to auto insurance. If something happens to your house or personal belongings, the typical insurance policy covers repair or replacement costs up to a certain amount. That \u201csomething\u201d can include fire, certain weather events and natural disasters, theft of personal property, and more. Separate home policies can be purchased for flood-prone areas.<\/p>\n

Real estate agent Jerome Leyba<\/a>, who sells homes 33% faster than the average agent in his home base of Santa Fe<\/a>, New Mexico, says that he often fields questions from his clients about homeowners insurance.<\/p>\n

\u201cAs agents, we all work within the scope of our expertise,\u201d he says, \u201cbut every real estate agent usually has some type of discussion with their buyer about homeowners insurance.\u201d<\/p>\n

Leyba says that when clients bring up the topic of homeowners insurance<\/a>, he always advises them to do their due diligence in vetting an insurance agent.<\/p>\n

\u201cWhen you\u2019re getting insurance quotes, you want to connect with local brokers who know the market,\u201d he says. \u201cYou might go online and find someone who gives you a better quote, but they don\u2019t know the specifics of your market.\u201d<\/p>\n

This would include making sure the agent knows whether your property is in an area where floods are likely (which requires separate coverage), what other natural disasters (hurricanes, tornadoes) are prevalent in the area, as well as the average replacement value of homes where you live.<\/p>\n

Understanding coverage is also critical, Leyba explains, stating that it\u2019s especially important when purchasing an older home that might have items that need maintenance.<\/p>\n

\u201cIf you\u2019re worried about things like sewer issues, insurance can come into play to some extent,\u201d he says. \u201cSome insurance companies will cover pipes all the way out to the street.\u201d This can potentially protect homeowners for things like water damage if those pipes were to break.<\/p>\n

Homeowners insurance<\/a> covers most major damage to a house, but there are several things it doesn\u2019t cover. This includes wear and tear like rust or mold, and general maintenance. Even for those items that are<\/i> covered, there are coverage limits that can affect just how much your insurance company will pay out if something does<\/i> happen.<\/p>\n

This is where Leyba\u2019s advice of vetting any potential insurance agent comes in handy, as well as making sure you read and understand precisely what your policy does and doesn\u2019t cover.<\/p>\n

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Source: (Jakob Owens \/ Unsplash)<\/figcaption><\/figure>\n

What does tax-deductible mean?<\/h2>\n

Scott Greenberg, who owns Hirsch Greenberg Accounting<\/a> in Illinois and has more than 30 years of experience in the tax industry, says that simply speaking, tax deductions are specifically allowed amounts that reduce one\u2019s taxable income.<\/p>\n

\u201cIncome is defined as any amount of money that comes into your hands,\u201d he says. \u201cDeductions reduce the amount of the income that is subject to being taxed.\u201d<\/p>\n

Greenberg says the primary deduction for a home would normally be the mortgage interest<\/a>, or the interest you pay each year on your mortgage loan \u2014 but he adds that as of right now, many people aren\u2019t even claiming it.<\/p>\n

\u201cThe IRS has really limited what homeowners can deduct,\u201d he says. \u201cDue to the new rules that took effect in 2018, many people that used to itemize now use the standard deduction.\u201d<\/p>\n

Those new rules, known as the Tax Cuts and Jobs Act of 2017<\/a>, were created to simplify individual income tax for households by expanding the standard tax deduction. As a result, fewer homeowners bother to try to itemize their deductions because the standard deduction is so much higher than any itemization.<\/p>\n

\u201cThe only real benefit is for a single person,\u201d says Greenberg. \u201cTheir standard deduction is much lower than that of a married couple, so they might be able to itemize and get a better overall deduction.\u201d<\/p>\n

\n If you have a rental property, you sometimes need to provide specific insurance to cover tenants. That is also considered an expense.<\/q>\n
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