With tax season looming ahead, homeowners and business owners alike are looking to gather any type of receipt that may be deductible. A common question that we receive from clients is “Can I deduct house insurance on my taxes?” While you cannot deduct house insurance for personal taxes, there are some circumstances, such as running a business or being a landlord, where you can.
In the article below, we will discuss what you need to know about deducting home insurance on your taxes.
Home Insurance Deduction on Rental Properties
If you are a landlord, form T776 is where you claim income and expenses, which includes rent collected from tenants and rental income for the previous year. Tax deductions can be claimed for any expenses relating to your rental property, including building insurance. Other expenses which are eligible for deduction are heating, water, hydro and mortgage insurance.
When you deduct your home insurance, make sure that you only deduct the current year’s coverage and not the full amount if your premium provides coverage for a longer period than one year. If this is the case, deduct the remaining premium amount the year that it is eligible.
You can claim the full premium amount paid if you rent a separate property or if only a portion of your rental property is your principal residence.
Home Insurance Deduction for Home Business
For those that operate a home business, certain home business expenses can be deducted on your return. There are some income tax deductions that are specific to home businesses and not all home businesses qualify. Because there are a number of guidelines and conditions, it is important to verify on the Canada Revenue Agency’s website what the most up-to-date home office tax deductions are.
Form T2125 is used to complete your “Calculation of business-use-of-home-expenses.” Make sure that you are aware that the expenses you claim on your T2125 form cannot be claimed anywhere else. If your home is used as your principal place of business to earn income, meet with customers or patients, you may be eligible to claim business-use-of-home-expenses. However, it is important to note that you can only claim a portion of the expense.
For example, if you have a 15×15 foot office in your 2,000 square foot home, you would need to calculate: 225/2000 = 11%. The 11% would be the portion you can claim as a business expense and the remaining 89% is considered your personal use portion. Gather all of your home office expenses such as electricity, property taxes, heating, phone, internet, repairs, and your home insurance and calculate your deductible business portion.
Now you know if you are eligible to claim your home insurance on your taxes. To save on your home business insurance, speak to a member of our experienced team. Get a free, no-obligation quote for your home insurance today.