With tax season getting closer, you may find yourself trying to uncover every last deduction possible. When considering your property expenses, there’s one question you’re probably asking: is home insurance tax deductible?
The good news is that there are a few instances where you can deduct your home insurance from your income tax – but there are certain conditions you need to meet.
Home office expenses for employees – can you claim your home insurance?
The pandemic has resulted in a lot of us working from home, and in some instances, this transition to a home office has become permanent. The home office expenses for employees claim allows you to claim your home insurance premiums in certain cases, and you can receive a personal income tax deduction for many other property-related expenses. The first step is to choose between the two claiming methods: the temporary flat rate method or the detailed method.
Home office expenses for employees: temporary flat rate method
Using the temporary flat rate method, you can claim $2 per day you worked from home between 2020 and 2022. However, this tax deduction is capped at a maximum of $400 in 2020 and a maximum of $500 in 2021 and 2022. With this route, you don’t need any documents to support your claim, nor does your employer have to sign any documentation.
You are eligible for the temporary flat rate method if you meet all of the following criteria:
- You worked from home in 2020, 2021, or 2022 due to COVID-19;
- You worked from home for at least 50% of the time for a minimum of four consecutive weeks during the applicable year (2020, 2021, or 2022);
- You solely wish to claim home office expenses and not additional employment expenses on your income tax (line 22900);
- You were not reimbursed for home office expenses by your employer.
The temporary flat rate method and your home insurance
Although the temporary flat rate method doesn’t necessarily deduct the cost of your home insurance from your personal income directly, it’s used as a deduction for general home office expenses, such as rent, electricity, and internet access. So technically, you can consider the cost of your home insurance to fall within this amount, even if you’re not explicitly writing your premiums on a tax form.
Home office expenses for employees: detailed method
Using the detailed method, you can deduct the actual amount you paid for work-from-home expenses, provided you have accompanying documentation like bills and receipts. Keep in mind that you’ll need to separate the expenses between your work use and personal use.
To be eligible for a detailed method claim, there are a number of criteria you must meet:
- You worked from home in 2020, 2021, or 2022 due to COVID-19, or your employer required you to work from home;
- You paid for expenses related to your at-home workspace;
- You worked from home for at least 50% of the time for a minimum of four consecutive weeks during the applicable year, or your home workspace is used solely to earn employment income and to hold meetings with people (i.e. customers, clients) regularly;
- The expenses you will claim are used directly for your work;
- You’ve received a signed and completed copy of Form T2200S (Declaration of Conditions of Employment for Working at Home Due to COVID-19) or Form T2200 (Declaration of Conditions of Employment) from your employer.
As a salaried or commission employee, you may be eligible to claim the following expenses:
- Heat, electricity, and water (including condo fees for these utilities)
- Internet access
- Home maintenance and minor repairs
- Rent for your home
NOTE: You may also be able to claim office supplies and phone expenses, provided your employer requires you to pay for them. These items, however, would be claimed separately from the home office expenses on either Form T777S or Form T777.
Naturally, there are limitations as to what can be claimed on your taxes. Principal mortgage payments, mortgage interest, internet connection, furniture, capital expenses (i.e. floor replacements), and wall decor are all excluded from the list of tax deductions.
Keep in mind that you won’t be able to claim the entire cost of all your home expenses – you can’t just deduct an entire year’s worth of rent from your personal income. Generally, the amount that you claim needs to be proportional to the use of the asset for business. For instance, if you only use one-fifth of your home as an office, you would only claim 20% of your home’s rent as an expense.
Detailed method tax claim example
Spaced used for home office
Eligible claim amount
The detailed method and your home insurance
One specific case in which you may be able to claim a portion of your home insurance premium using the detailed method is if you’re a commissioned employee who negotiates contracts and sells products. If you fall into this category, you're entitled to additional expense claims that regular, salaried employees cannot deduct. Aside from your home insurance, this includes property taxes and lease of technology fees (e.g. laptop, tablet) that relate to your commission earnings.
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Rental expenses for landlords – can you claim your home insurance?
Yes, if you own a home for rental income, you can claim the rental property insurance premiums as an expense. Generally speaking, reasonable expenses that you incur to run your business are acceptable – you are entitled to certain rental expense deductions when it comes to tax time, including:
- Advertising – including any advertisements in Canadian media as well as amounts paid for finder’s fees;
- Insurance – premiums paid on the rental property for the current tax year;
- Interest and bank charges – interest on money borrowed to purchase or improve the property, as well as interest on a tenant’s rental deposits;
- Office expenses – small office items such as pens, pencils, stationery and stamps;
- Professional fees – legal service fees for collecting overdue rent or preparing leases, as well as fees for bookkeeping, audits, and preparation of financial statements;
- Management and administration fees – amount paid for property management services or for agents to collect rent or find new tenants;
- Repairs and maintenance – cost of material and labour for minor repairs on a rental property (excluding repairs that you’ve performed yourself);
- Salaries, wages, and benefits – amounts paid for employees of your rental property;
- Property taxes – applicable to the time for which the property was available to rent;
- Travel – expenses from travel incurred to collect rent, oversee repairs, and manage the rental property;
- Utilities – cost of utilities if it is stipulated in the contract that these are paid by you, instead of your tenant;
- Prepaid expenses – you can deduct certain prepaid expenses (e.g. insurance) so long as you only deduct the amount relating to the current tax year.
Business-use-of-home expenses – can you claim your home insurance?
Is your home your principal place of business? Do you use the space to earn income and regularly meet with clients, patients, or customers? If you answered yes to at least one of these questions, you may be eligible for deductions from certain business-use-of-home expenses, including your property insurance. Keep in mind, however, that these claims aren’t used for filing your personal income tax return but rather when you report your business income.
Expenses such as home insurance, electric and heating costs, property taxes, mortgage interest, and capital cost allowance are all eligible for deduction. You will, however, need to be reasonable in your claim amounts. So for instance, let’s say your office takes up one-fifth of your space, and it’s used solely for your business while the rest of your home is for personal use only. In this case, you would only be able to claim 20% of the above costs as a tax deduction from your business income.
If you don’t own a home but rent one instead, you are still able to deduct the amount you use for your workspace. However, you need to make sure that you don’t use your expenses to create a business loss – that is, claim more than your net income. And again, it’s important that you only claim an amount proportional to the space you used for business operations.
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Other deductions and credits for Canadian homeowners
Aside from claiming your home insurance as a tax deduction, there are other ways you can reduce the amount of taxes you owe as a Canadian homeowner – here are a few non-insurance-related benefits you might find applicable to your situation.
As a first-time homebuyer, you could receive the home buyers’ amount which allows you to claim up to $5,000 for purchasing a qualifying property. There is also a GST/HST new housing rebate you can claim if your home is a new build, and if you’ve purchased or built a residential rental property, you may be entitled to the government’s GST/HST new residential rental property rebate.
In certain cases, you can also claim your moving expenses if you’re moving to a new home for work reasons, or you’re moving to a new home as a full-time student.
Additionally, if you’re renovating your home to make it more accessible for seniors on someone living with a disability, you could be eligible for the home accessibility tax credit (HATC). And in some specific cases, the federal government also offers medical expense claims related to your home, such as air conditioning expenses.
Certain provinces offer additional tax credits you should be aware of. For instance, Manitoba offers an education property tax credit to help offset school taxes, and if you are a first-time homebuyer in Quebec, you may be eligible for the Quebec homebuyers’ tax credit.
The bottom line
So is home insurance tax-deductible in Canada? The answer is yes, but only in certain cases. When it comes to doing your taxes, each person may fall into different circumstances, so be sure to consult your provincial government and reach out to a tax professional to find out if there are additional rebates you can take advantage of. The more deductions and credits you can claim, the greater benefit to your bottom line.