Property protection costs: If you have a mortgage, your bank will require you to insure your home in case something terrible happens. Since your financial institution actually owns your home even though you’re making monthly payments, it wants some guarantee that the structure isn’t rendered worthless in case it’s severely damaged or destroyed by a fire or tornado or some other disaster.

We got out annual homeowner’s insurance policy renewal today and a new item on the document necessitated a call to the agent. For the first time, our policy noted the age of our roof. But the document’s date was wrong. It didn’t reflect that we got a new roof several years ago.

I’m no insurance agent, but I suspect having up-to-date data on our house will affect coverage, as well as possibly our premium.

That annual premium, thanks to the increasing property values in our area of Austin, has increased every year.

If your real estate circumstances are similar, or even if your policy’s premiums have been flat, you know these policies can be expensive. And it’s a cost that homeowners just have to suck up every year. While there still are some home-related costs that can be deducted on federal taxes, homeowner’s insurance generally is not.

Working from home: But wait! There’s a little more. As is so often the case with taxes, there’s an Internal Revenue Code exception that could make at least a part of your policy tax deductible.

You can write off a portion of your home insurance premium when use part of your home for business. In this situation, the Internal Revenue Service will allow you to claim a portion of your overall residential policy premium as it relates to your work space.

The amount of the policy’s cost that can be claimed is the percentage of your home used as your home office. For example, if 10 percent of your home is your office, then 10 percent of your home insurance premiums can be deducted.

If you use your garage or a free-standing structure on your property to do your work and it’s covered by your homeowner policy, that area’s square footage also qualifies as home-office expense deduction.

I use a spare bedroom as my home office. Every year when I get our homeowner’s policy renewal, in addition to (1) griping about this year’s higher cost and (2) checking it over for changes or additions, I also (3) make a copy and drop it into my office expenses file for tax filing next year.

Then when I go to fill out my Schedule C and the associated Form 8829Expenses for Business Use of Your Home, I have that premium amount, along with my home’s monthly utility bills that I also pro-rate as a home office expense, handy.

Added insurance also counts: Depending on your business, your insurance needs might need to be increased.

Your run-of-the-mill might not cover the value of business property you have. In fact, it might even exclude certain coverages.

So if you have a valuable home computer set-up you need to effectively do your job or you keep a lot of inventory in your home office, it’s worth at least looking at getting a separate rider to your homeowner’s policy or a separate commercial insurance policy altogether.

That special business policy is, of course, an allowable deduction for your home-run business.

Making sure your home office qualifies: Of course, your home office must meet Internal Revenue Service muster before you can claim even a portion of your homeowner’s insurance policy or any other costs.

If you are the business owner, your home office must meet two requirements. Your home-based office must be:

  1. Used regularly and exclusively for business. It doesn’t have to be a separate room; a portion of room designated for work use only counts. But regardless of how large or small, the room or area cannot be used for personal tasks, too.
  2. Used as your principal place of your business. This is possible even if you conduct business outside your home, for example, to meet with clients, as long as you use your home substantially and regularly to conduct business.

While, as I noted earlier, I use a spare room in my house as my office. But tax law doesn’t demand you have such a defined, separate area for it to count as a home office. A section of a room that you and only you use to do work only can count, even if the room is used for other activities.

You can find more on home office deductions and other expenses in IRS Publication 587Business Use of Your Home (Including Use by Daycare Providers).

Home offices under COVID-19 closures: With so many firms closing as a way to stem the spread of the coronavirus, thousands of folks have been working from home for weeks.

Does that mean they, too, can claim their temporary home-based workspace as a home office and get some tax break? Short answer, no.

Longer answer is that used to be a possibility until a few years ago.

The Tax Cuts and Jobs Act (TCJA) that became law in late 2017 did away with the itemized deduction where this might, maybe, possibly have been claimed here.

Prior to the TCJA, unreimbursed business expenses were potential miscellaneous deductions, including a home office as long as it was for the convenience of the employer, on Schedule A. That tax claim option was eliminated with the enactment of the Republican tax reform bill.

Questionable home worker claims: Also, even though I know my very tax-law abiding readers don’t need reminding, don’t try to push the deduction envelope because you are legitimately working from home.

When you do so as an employee of someone else — that is, you’re getting paid by a company that will issue you a W-2 form — you cannot claim home office expenses on Schedule C. That’s only for folks who are self-employed, including gig workers and side hustlers.

If you try to claim home office expenses that began in March 2020 when COVID-19 started accelerating and businesses started shutting down and then “closed” your home-based business later when your workplace re-opened (properly arranged for safe social/work distancing, I hope!) and you started go back there, expect the IRS to notice.

And that notice will be in the form of an official notice, otherwise known as a correspondence audit. The relatively small home office tax break you might get is not worth that kind of trouble.