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Is home insurance tax deductible for landlords?

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To answer the question of whether home insurance is tax deductible or not, you first need to understand how insurance policies work. These are availed primarily to safeguard oneself against any financial burden arising out of an unfortunate incident. For example, when it comes to a citizen’s health, the government would want its citizens to protect themselves and their families from financial ruin by purchasing insurance policies, while the government would then need to invest a lower amount in healthcare infrastructure. This helps the government focus on other developmental areas, while also putting the onus of individual financial security on its citizens. Also, sometimes the insured may not make any claim while still paying the premium. This is where the tax benefit acts as an attractive proposition.

To further reward its citizens for taking an insurance policy, regulations provide for income tax relief to individuals, fuelling a cycle of self-reliance and self-care, along with immediate, tangible financial benefits. However, in the case of home insurance, because it is entirely meant for personal use, tax deduction benefits do not extend to this domain. You are living in the house that you have insured, as a result of which, additional financial benefits for insuring your home may seem extravagant.

However, there are ways in which home insurance premiums can be tax deductible.

Small business at home

If you’re running a small business from your home, you may be eligible for tax deductions. A business such as gardening, or lawn care, may qualify. However, a large business like running a day-care may require a specific insurance policy for the business and will not come under the purview of home insurance. You will need to purchase a commercial insurance policy in that case.

Also, note that any small business that you run from your property, must have a dedicated area for its operations, devoted solely to the purpose of the business. A workspace will qualify for tax deduction if it has a free-standing structure or garage that is used solely for the business and is central to business operations.

To determine the value of tax deduction, you can measure the area of the workspace, with respect to the total area of the insured property. Using the same ratio, calculate the amount of premium that you’re paying for the workspace area, which can then be deducted as a business expense.

Rental income as a landlord

In cases where the property owner has let out the property on rent, a maximum of 30% standard deduction on gross rent is allowed. If you have several properties let out solely for rental income, home insurance for all these properties is tax-deductible. You can expand your liability coverage with the help of riders and add-ons. 

Finally, if you are working from home and using a room as your office, you can get a partial deduction from your home insurance policy, much like small business owners operating from home.

So, to reiterate, while tax deductions on home insurance policies, under general conditions, are not applicable, the benefits of having one outweighs the lack of tax benefits. You can insure your home against theft, and damages, and insure all your expensive items as well while still enjoying their possession.

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