Any condo owner knows how important insurance is but is the more to insuring your home than simply protecting it? Is condo insurance tax deductible? First, it’s important to note that this is more or less the same as asking, “is home insurance tax deductible”. Owning a condo might be a very different experience than owning a full house, but the way they can both affect your taxes doesn’t change much outside of things like property taxes where the square footage of property owned takes effect. And just like with homeowners insurance, condo insurance is not usually tax deductible. There are some cases where it can be so if you’re looking for a bigger refund this year, let’s get into the specifics.
What is condo insurance?
Condo insurance protects condo owners and all their belongings within the walls of their unit. It’s important to make that distinction because the primary difference between condo and homeowners insurance is the scope of what they cover. Condos are single units within a larger building or complex that is managed by a condo association or HOA. Because everything that falls outside of a condo unit’s walls is covered by that association’s master policy, a condo insurance policy typically only needs to cover what’s inside.
There are exceptions, of course, like in the case of an HOA assessment. HOA’s and condo associations’ insurance policies may occasionally encounter costs that go beyond their coverage. When this happens, the HOA or condo association will perform a special assessment in which they determine what residents of the condo complex must pay to cover the difference. Condo owners can purchase additional special assessment insurance coverage as an add-on to their standard policy.1
What is a tax deduction?
Tax deductions reduce the amount of income you can be taxed for during the previous year. For example, if you earned $70,000 in the last year, but you received a $10,000 tax deduction, then the government would tax you as though you only made $60,000.2 People can receive tax deductions for everything from children to charitable donations, and yes, sometimes the insurance policy you use to protect your condo. To determine if you qualify for a tax deductible, please consult with your Tax professional.
What is the difference between condo and homeowners insurance?
Condo insurance and homeowners insurance can be hard to differentiate. Both insure the home you own and all the things inside it. But “inside” is the key distinguishing factor. Condo units are spaces that are part of a larger building or complex which is managed by an HOA or condo association. The association has its own master policy for protecting the spaces and features outside of each unit. Homeowners insurance is typically purchased by people who own houses, which come with exteriors and surrounding property the homeowner is responsible for. A homeowners insurance policy extends to things outside of the home’s walls such as the roof and siding.3
How can condo insurance be tax deductible?
So, if your policy isn’t deductible in most cases, then how exactly can you get a condo insurance tax deduction? The short answer is you’ll have to be doing something with your home besides living in it. Condo insurance premiums may be tax deductible if the applicable condo unit is being used as a rental property or if part of the unit is designated as a home office. If you want specific information about your situation, you should consult a tax professional.
You can also sometimes get a home insurance deduction if you filed a claim that was denied by your insurance company or the damages claimed were not fully covered. These damages usually must have been caused by a sudden, unexpected, and unusual event like a natural disaster, terrorism, mine cave-in, or government-ordered demolition of a building deemed unsafe.4
The bottom line
In most cases, you will not be able to earn a tax deduction for your condo insurance. If you work from home or rent your condo out then you could be in luck! If you believe an insurance claim that was denied or not fully covered qualifies as a “casualty loss” as previously described, then you may also be able to deduct it.4 Please consult with a Tax professional to help answer these questions.
Deductible or not, insuring your condo is still very important. Get a free quote from Nationwide today and learn how condo insurance can protect you and the things you care about most.