Today’s question comes from Nichole, who has Houston, TX renters insurance. Nichole wants to know,
With all the recent discussion of the tax implications of the Affordable Care Act and the way that having or not having health insurance can affect your taxes, I’d like to know, is there a tax deduction for renters insurance? A legitimate one, not creative accounting.
With all the debate and recent changes, it’s logical for this question to come up, and the short answer is “maybe”. To really answer the question, we need to go down some rather convoluted rabbit holes.
Is There A Tax Deduction For Renters Insurance?
Is There A Tax Deduction For Renters Insurance? Scenario 1
In this first scenario, let’s use an individual who works from home and has a standard renters insurance policy. She primarily uses her computer for business but also a bit for personal use. The line gets somewhat blurry there. If we assume that the insured is a sole proprietor or trading as one of certain types of pass-through entities and there were a total fire loss including the computer, the computer may not be covered because it’s used primarily for business purposes. If that’s the case, the individual could theoretically deduct the cost of a replacement from the business taxes because it was not reimbursed by insurance. That’s closer to having a tax deduction because your policy doesn’t have the right endorsements, but it’s technically accurate.
Is There A Tax Deduction For Renters Insurance? Scenario 2
This time our hypothetical involves someone moving a long distance for a new job. When she relocates, some or all of the moving expenses may be deductible. If in the new location the individual is required to have renters insurance by her property management, the cost of the same may be deductible as a moving expense per the above. While you should get tax advice from the proper professionals, IRS Topic 455 can give you more information as well. In order to benefit from this, you’d probably have to pay the annual premium in a lump sum if you wanted to deduct the entirety of it, and your personal situation may vary. In this case, there could well be a tax deduction for the cost of renters insurance because it’s an expense related to an otherwise qualified move.
Is There A Tax Deduction For Renters Insurance? Scenario 3
Your kids are finally going off to college, and you’re equal parts thrilled and concerned about it. You know about the education tax credits. But did you know that you may be able to include renters insurance in that calculation if the landlord requires renters insurance? See your tax professional for further advice and to see if this is applicable to your family. If so, it may even be applicable towards a tax credit rather than a tax deduction, and everyone loves those – especially the refundable ones…
Is There A Tax Deduction For Renters Insurance? Scenario 4
You run a business from your home. You legitimately have a part of your home set aside for business purposes, and you deduct that square footage worth of rent and utilities. You may also be able to deduct the equivalent percentage of your renters insurance cost as a business expense!
Ultimately, this is not a how-to guide so much as some things to get you thinking. Your situation may vary, and some or all of these may not fly. But maybe now that you’re wondering is there a tax deduction for renters insurance, you have some ideas that are relevant to your own situation. Give it some thought, and then go see your accountant. We provide Effective Coverage for renters and leave the actual tax advice to your CPA. It’s food for thought, in any case, and one more reason that renters insurance is something no one can live without!