Insider’s experts choose the best products and services to help make smart decisions with your money (here’s how). In some cases, we receive a commission from our our partners, however, our opinions are our own. Terms apply to offers listed on this page.
You might be able to write off renters insurance using the home office deduction if yo u’e self-employed.
Maskot/Getty Images
Renters insurance might be tax deductible if you use part of your home for business and work for yourself.
You can only claim a deduction if you use the space exclusively and regularly for business purposes.
People who receive a W-2 or don’t work from home don’t qualify for the deduction.
See Personal Finance Insider’s picks for the best tax software.
With more people working from home in recent years, questions about what work-related expenses are deductible on your tax return frequently come up around tax time. You may be wondering if renters insurance is one of them.
While it is not deductible for most taxpayers, if you are self-employed and work from home, you may be able to claim a deduction for a portion of what you paid for renters insurance.
Is renters insurance tax deductible?
Renters insurance is generally not tax deductible. After the Tax Cuts and Job Act was passed in 2017, W-2 employees could no longer deduct work expenses on their federal tax returns. However, business owners may qualify for renters insurance tax deductions, says Sarah York, staff writer and in-house tax expert for Keeper Tax, a startup geared toward helping freelance and gig workers maximize their tax savings.
When is renters insurance tax deductible?
Like homeowners insurance, you can deduct renters insurance if you’re self-employed and use a portion of your rented unit as a home office. However, your home office must be regularly and exclusively used for business purposes, according to the IRS. A tax-deductible home office could include a room in your unit that you’ve specifically designated for business activity.
When isn’t renters insurance tax deductible?
If you receive a W-2 from an employer, even if you work from home and have a home office, you can’t use it to deduct renters insurance expenses, says York.
You also might not be able to deduct renters insurance even if you’re self-employed. If your home office is used for anything other than business purposes — for instance, doubling as a guest room, it would not meet the IRS requirement and therefore not qualify for deductions, says Audrey Blanke, a certified financial planner at Atlatl Advisers, a wealth-management firm in Madison, Wisconsin.
How to calculate the renter’s insurance deduction
There are two ways to claim renters insurance deductions for your home office: the simplified method and the regular method.
Simplified method
The simplified method is based on the square footage of your office. It allows you to deduct $5 per square foot up to 300 square feet, or $1,500. If you didn’t use the space for a home office during the entire year, this amount must be pro-rated.
“As a business owner, if you have a traditional office you lease out, in addition to a small working space in your apartment, you and your tax professional need to take into consideration the amount of time spent in each space and the types of duties being carried out,” says Blanke.
Regular method
The regular method is a bit more complicated. It has two components: direct expenses and indirect expenses. Direct expenses are 100% deductible and include things like office supplies, the cost of a phone line, or the cost of furnishings. Indirect expenses aren’t exclusively related to your business, including things like your mortgage, property taxes, and renters insurance.
To use the standard method, divide the square footage of your home office by the square footage of your entire home. This gives you the base percentage of your home office, which is how much you’re eligible to claim. So, say your base percentage is 5%, you’re then allowed to claim 5% off all office-related expenses, including renters insurance.
Since the simplified method is easier to use, it may be a better option for people looking to save time and forgo the hassle of keeping track of all business expenses. Plus, it minimizes the risk of auditing from the IRS, says York.
How to claim the renter’s insurance deduction
After figuring out your deduction using the simplified method, you can claim this amount on schedule C under line 30. If you’re using the standard method, you will be completing Form 8829, “Business Use of Your Home.” Report your renters insurance on line 18 under “indirect expenses.” Then after filling out your form, take the total home office deduction amount to your schedule C.
The home-office deduction can draw increased scrutiny from the IRS. So be sure to report your actual business expenses. Remember that your home office must be regularly and exclusively used for business activity. Additionally, office-related expenses must be exclusively used for your business to claim this deduction. York suggests using the simplified method if you are concerned about IRS auditing.
“Don’t be too aggressive,” York says. “As tempting as it is to write off major home expenses, if you aren’t able to defend it when the IRS comes knocking, you will be on the hook for additional taxes and penalties.”