Is Hazard Insurance Deductible on Taxes?

4 additional tax-saving tips for homeowners

While hazard or homeowners insurance premiums generally aren’t tax-deductible for primary residences, there are other ways to save on your tax bill as a homeowner. Here are four tax-deductible expenses to consider:

1. Mortgage interest: If you itemize deductions instead of taking the standard deduction, you might be able to deduct the interest you paid on your mortgage throughout the year. There are limits on this deduction, so be sure to consult with a tax professional to see if it applies to you.
2. Property taxes: Property taxes (or real estate taxes) you pay to your state or local municipality are typically deductible on your federal tax return if you itemize. This deduction can significantly reduce your taxable income.
3. Accessibility improvements: If you make improvements to your property to make it more accessible for medical reasons, such as adding a wheelchair lift or ramps, the cost of these upgrades may qualify as itemized deductions on your tax return.
4. Energy-efficient upgrades: Did you recently replace your old windows with energy-efficient models, or install a new solar energy system? The federal government offers tax credits for certain energy-saving home improvements. These credits can lower the amount of taxes you owe or even result in a tax refund. Be sure to research current qualifying improvements and credits to see if you’re eligible.

What might not be covered by hazard insurance?

While hazard insurance covers many potential dangers, there are certain risks it may not cover, especially if your home is in a high-risk area prone to specific types of natural disasters. In such disaster-prone regions, common exclusions include:

• Floods: Standard hazard insurance usually does not cover flood damage. You may need separate flood insurance if you live in a flood-prone area.
• Earthquakes: Like floods, earthquakes and other earth movements often require additional coverage.
• Government action: Damage to your home or personal belongings caused by the actions of a government or public authority.
• Acts of war: Damage resulting from acts of war or terrorism is typically excluded.

What about hurricanes?

Most standard homeowners insurance policies cover damage caused by strong winds, including hurricanes. However, depending on where you live, your policy may require modifications. For example, if you own a home in a coastal county in North Carolina, you may be required to pay a higher rate and/or accept a separate deductible for damage caused by wind and hail or hurricane-named storms.

What about wildfires?

The location of your home also plays a key role in whether your homeowners policy will cover wildfire damage. Most standard policies will cover common types of fires, such as kitchen fires, electrical fires, and even a fire that spreads through a neighborhood. However, according to Progressive Insurance, if you live in a region where wildfires are common, damage caused by wildfires may not be covered. If it is covered, like North Carolina’s hurricane policies, you may pay a higher rate and/or be forced to accept a separate deductible for wildfire claims.

Hazard insurance vs. catastrophe insurance

If you live in an area prone to one or more of the perils listed above, you may need a separate rider or policy to cover losses from such threats. The Legal Information Institute at Cornell Law School explains that a separate policy may be referred to as catastrophe insurance, which it defines as “a standalone policy that covers specific types of disasters, including those caused by humans.”

Other possible non-covered damage

According to Policygenius, other common policy exclusions include:

• Pest infestations
• Mold or wet rot
• Certain dog breeds
• Wear and tear or neglect
• Power surges caused by your utility company
• Home-based business liability
• Local building ordinance or law
• Intentional damage
• Nuclear hazards

A top agent can provide valuable property insights

Understanding the tax implications of homeownership can be complex, especially when it comes to specific situations or deductions. While this blog post provides a helpful overview, consulting with a qualified tax professional is always recommended to ensure you’re maximizing your tax benefits.

However, tax considerations are just one piece of the puzzle when it comes to property ownership. A top real estate agent can be a valuable resource throughout your homeownership journey. From navigating the complexities of buying and selling to understanding market trends and local regulations, a knowledgeable agent can provide expert guidance and insights.

HomeLight can connect you with top-performing real estate agents in your area. These agents have a proven track record of success and are familiar with the local market.  Whether you’re looking to buy, sell, or simply have questions about your property or its current value, HomeLight can help you find the right agent to guide you.

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