Is home insurance tax deductible?

12 minute read Published on Apr 25, 2023 by BrokerLink Communications

Homeowners Insurance & Mortgage Payments

Homeowners in Canada, especially homeowners with mortgages, may be wondering if home insurance is tax deductible. After all, who doesn’t want to save on home insurance premiums, right? And being able to deduct home insurance taxes from your income tax return can help you do just that - save money! That’s why we’re diving into the topic of home insurance tax deductible below. Keep reading to gain a better understanding of how home insurance works and under what circumstances it is tax deductible.

What is home insurance and what does it cover?

Before we explore home insurance and tax deduction, let’s make sure that we’re all on the same page about property insurance. Home insurance is a type of insurance coverage designed to protect the place you live, whether you own or rent your home, and whether you live in a condo, apartment, townhome, duplex, triplex, single family home, or another type of residence. BrokerLink is a home insurance brokerage with expertise in a wide range of property insurance, including vacant home insurance, high-value home insurance, rental property insurance, and more. If you aren’t sure what type of home insurance is best for you, you may need an insurance broker. An insurance broker can assess your needs and give a professional opinion on the best type of policy and coverage for them. Below is a rundown of some of the most common types of home insurance coverage in Canada:

Dwelling coverage

Dwelling coverage is a type of coverage you will find in almost every home insurance policy in Canada. It is designed to protect the physical structure of your home against specific kinds of property damage and losses. The types of damage and losses it protects against depend on the perils named in your policy. Perils commonly covered by dwelling insurance coverage include:

  • Fire
  • Lightning
  • Smoke
  • Theft
  • Wind
  • Car / aircraft impact
  • Explosion
  • Falling objects

Please note that dwelling coverage does not cover damage or losses that occur to the land your home sits on nor any detached structures on the property, such as detached garages, sheds, gazebos, or swimming pools. You would likely need to add other structures courage to your policy if you want these detached structures covered.

Content(s) coverage

Contents coverage is another type of coverage you are likely to find in most Canadian property insurance policies. Contents coverage, sometimes referred to as personal property coverage, protects the items inside your home from damage caused by an insured peril, like theft, fire, lightning, and more. The specific items covered vary between policies but may include electronics, clothing, furniture, decor, sports equipment, and more. If you have items of particularly high value, like expensive artwork, fine jewellery, vintage wine, or musical instruments, we recommend checking your policy to ensure you have adequate coverage for these high-ticket items. If your coverage limit is too low, you may not be compensated in the event that such items are damaged or stolen.

Personal liability coverage

Personal liability coverage is a type of home insurance coverage that is quite common. Unlike dwelling and contents coverage, it deals with losses relating to liability claims rather than property damage. More specifically, this type of coverage can protect you if a third party brings a lawsuit against you that alleges bodily injury or property damage relating to your property. For example, if a guest visits your home but they slip and fall on an icy walkway leading to your front door, they could sue you. As the homeowner, you could be held liable, which might mean having to pay the cost of legal fees and the claimant’s medical expenses out of pocket. Given how expensive lawsuits can be, fighting one on your own can have serious financial consequences. Luckily, if your home insurance policy features personal liability coverage, your insurer will help cover some of the associated costs.

Commercial coverage

Commercial coverage can be added as a rider or endorsement to a home insurance policy. It is best suited to policyholders who run businesses out of their homes or who work from home regularly, especially if you store inventory at your home or have clients, customers, and employees visit your home. Of course, if you prefer, you can also take out a separate commercial insurance policy for your business. Commercial insurance coverage varies but may include commercial property insurance, cyber liability insurance, product liability insurance, commercial general liability insurance, and more.

Equipment breakdown coverage

Equipment breakdown coverage is another type of add-on that can be included with home insurance policies. It can be beneficial to homeowners who want the peace of mind of knowing that if a piece of household equipment suffers a mechanical or electrical failure, they will be protected. Since dwelling or contents coverage will only cover damage caused by insured perils, your household appliances won’t be covered if they stop working due to a mechanical failure. But equipment breakdown insurance covers just that, meaning if such an incident occurred, your insurer would reimburse you for the cost of repairing or replacing the equipment. Please note that equipment breakdown coverage may cover refrigerators, ovens, stoves, dishwashers, laundry machines, and even HVAC units like furnaces and air conditioners.

Sewer backup coverage

Sewer backup coverage is a type of flood coverage that you might find worthwhile. When you add this type of coverage to your policy, it can protect you in the event that a sewer backup causes water damage to your home. Specifically, your insurance company can help pay for the cost of cleanup and reparation of the damage.

Overland water coverage

A second type of flood insurance is overland water coverage, which is also commonly added to property insurance policies in Canada. With this type of coverage, your insurer can reimburse you for the cost of any necessary repairs following water damage caused by a nearby lake/river, overflow, heavy rain, or rapid snow melt. Therefore, this type of coverage is well suited to any homeowner who lives near a major body of water or in a part of Canada that experiences heavy precipitation throughout the year.

Home insurance tax deductibles

Since you now know more about what home insurance is and how it can cover you, it’s time to discuss home insurance tax deductibles. Knowing what can and cannot be deducted from your taxable income is crucial come tax time, especially if you want to avoid paying the government more than you have to:

Is house insurance tax deductible in Canada?

Whether you’re a first-time homeowner or not, you may be curious to know whether home insurance premiums are tax deductible. Generally speaking, no, home insurance is not tax deductible. For the average homeowner who takes out a home insurance policy on their primary residence, you will likely not be able to deduct your premium from your taxable income. However, there are a few exceptions to this. There can be allowances that give you the opportunity to deduct your home insurance premiums if you rent your property or even a portion of your property, or if you use your property for business purposes. Note that business purposes include self-employed small business owners and employees who work from home on commission. Therefore, if you own a rental property or rent out part of your home, whether long-term or short-term, such as through a home sharing platform, or you operate a business out of your home, you are eligible for a home insurance tax deduction.

Other expenses beyond home insurance that you might be able to claim if you use your home for business purposes include:

  • Expenses for new equipment like cell phones, laptops, fax machines, etc.
  • Utilities like heat, electricity, and water.
  • Condominium fees related to utilities.
  • Internet bills.
  • Cell phone bills.
  • General maintenance.
  • Rental payments.

Note that you are only allowed to deduct the portion of the expenses related to their business usage, so if 30% of your cell phone usage is related to business activities, you can only deduct 30% of your monthly bills from your taxable income.

Is mortgage insurance tax deductible in Canada?

While home insurance may not be tax deductible in all cases, mortgage insurance is typically tax deductible. This means that if you own a home with a mortgage in Canada, you can likely deduct your insurance premiums from your taxable income. Mortgage insurance is a type of insurance that covers borrowers in the event that they miss a mortgage payment. The amount homeowners pay for mortgage insurance varies according to the value of their home and how high a down payment they made. Homeowners who give down payments of 20% or more typically have lower mortgage insurance premiums than homeowners who made a down payment of less than 20% and therefore require greater financial protection. In fact, many banks and mortgage lenders require borrowers who made down payments of less than 20% to purchase mortgage insurance. The good news is, whether your lender required you to purchase mortgage insurance or you purchased it of your own accord, it is tax deductible.

Are improvements and renovations tax deductible in Canada?

Depending on the province or territory you reside in, you may be able to deduct home renovations from your taxable income. For example, under the Canada Greener Homes Grant, Seniors’ Home Safety Tax Credit (Ontario), Disability Tax Credit, or Home Buyer Tax Credit, Canadian homeowners can deduct a variety of home improvement-related expenses.

Canada Greener Homes Grant

The Canada Greener Homes Grant is a rebate offered to those who renovate their homes to be greener and more energy efficient.

Seniors’ Home Safety Tax Credit

The Seniors’ Home Safety Tax Credit is designed for seniors or those who have seniors living in their homes. If you renovate your home in a way that makes it safer or more accessible for yourself or the senior residing with you, you could be eligible for this tax credit. Please note that the Seniors’ Home Safety Tax Credit is available exclusively in Ontario.

Disability Tax Credit

The Disability Tax Credit is a nationwide tax credit that offers a rebate to someone who renovates their home to make it more accessible to someone living with a disability. This can be claimed by the person with a disability or by someone who lives in the home with them.

Home Buyers Tax Credit

Lastly, the Home Buyers Tax Credit, formerly known as the First-Homebuyer Incentive, is a federal assistance program that allows first-time homebuyers to claim an income tax credit of up to $5,000 on a qualifying home, resulting in a maximum rebate of $750. Please note that for the form to qualify, it must be registered in your or your spouse's or common-law partner's name in accordance with the applicable land registration system in your province or municipality and it must be located in Canada. Note that qualifying homes can be apartments, condos, townhomes, detached homes, semi-detached homes, and more. They can even be homes under construction. If you are eligible for the Home Buyers Tax Credit, you must list the amount of $5,000 on Line 31270 of your income tax return during the relevant year.

Please remember that any time you are filing a tax return with the Canada Revenue Agency (CRA), we urge you to consult with a tax professional, especially if you aren’t sure whether you are eligible for a certain tax deduction.

Other incentives and deductions for Canadian homeowners

Buying a home, and everything that comes along with it, from monthly mortgage payments to home insurance premiums, can be expensive. Thankfully, there are several ways to save money on this major expense. Below is a list of other incentives and deductibles that you may be eligible for as a Canadian homeowner. This means that even if you cannot deduct your home insurance premiums from your taxable income, you might still be able to save money:

Home Buyers’ Plan

The Home Buyers’ Plan is an assistance program offered by the federal government to alleviate the financial burden of buying your first home. It allows homebuyers to withdraw up to $35,000 from their Registered Retirement Savings Plans to purchase an eligible home. This money can be withdrawn tax-free and buyers have 15 years to pay back the funds.

Ontario First-Time Home Buyer Incentive

The Ontario First-Time Home Buyer Incentive is for first-time home buyers in Ontario. This assistance program functions as a tax rebate, in which eligible homebuyers can receive a land transfer tax refund of up to $4,000 on their home purchase.

Toronto First-Time Home Buyer Incentive

The Toronto First-Time Home Buyer Incentive is similar to the Ontario First-Time Home Buyer Incentive, except it’s for first-time home buyers residing in the municipality of Toronto. Under this incentive, eligible buyers can receive a land transfer tax rebate of up to $4,475. Please note that the Ontario and Toronto First-Time Home Buyer Incentives can be used in conjunction, meaning that eligible buyers could earn a maximum rebate of $8,475.

GST/HST new housing rebate

If your home was newly built and was purchased from a builder, even if the property is located on leased land, you could be eligible for the GST/HST new housing rebate.

GST/HST new residential property rebate

If you bought or built a residential rental property, you might be able to take advantage of the federal government’s GST/HST new residential property rebate. This rebate is designed to help landlords who purchased a newly constructed property, built their own residential rental property, or made an addition to a multi-unit residential rental complex.

Moving expenses

Did you know that if you move, you might be able to deduct certain moving expenses from your taxable income? That’s right, depending on the circumstances of your move, you might be eligible for a tax deduction. Specifically, if you moved to a new home for work purposes or for your education (e.g. if you are a student), you might be able to claim the associated moving costs.

Medical expenses

In some circumstances, you may be allowed to claim medical expenses related to your home on your federal income tax return. An example of such an expense is the cost of installing or running an air conditioner.

Contact BrokerLink for more information on home insurance tax deductibles in Canada

If you need more help understanding home insurance tax deductibles, including under what circumstances home insurance can be deducted from your taxable income in Canada, contact BrokerLink today. While we are not tax professionals, we are home insurance experts, and any one of our licenced insurance advisors would be pleased to answer your questions. We can explain how home insurance works, the difference between home insurance vs homeowners insurance, and what types of homes make you eligible for a tax deduction. We can also explain how property insurance premiums and deductibles work and give you tips on how to save money on home insurance. No matter your house insurance needs, get in touch with BrokerLink today. You can reach us by phone, online, or in person at one of over 200 BrokerLink locations across Canada.


FAQs on home insurance tax deductibles

Can I claim home insurance tax deductions on a rental property?

Yes, if you own a rental property, you can deduct several expenses from your taxable income come tax time, and that includes property insurance. For instance, if you rent out a property or even a portion of your primary residence, you can claim your entire home insurance premium. You may also be able to claim other expenses, like mortgage insurance, utilities, and rental income.

Can I claim my homeowners insurance premium for a home office if I am an employee?

In certain circumstances, you might be able to claim your home insurance premium when you are an employee who works from home. It’s not just owners of home businesses that are eligible for home insurance tax deductions. To qualify for a home insurance tax deduction if you are an employee who works from home, your home office must be exclusively used for business purposes and the space must be used to complete over 50% of your work.

How can I save money on home insurance?

There are many ways you can save money on home insurance, whether you qualify for a home insurance tax deduction or not. For example, you can bundle insurance policies, install a sewer backup detection device or monitored alarm system in your home, purchase a home located near a fire hydrant or fire station, pay for your home insurance policy annually instead of yearly, or work with a broker to compare policies and get a competitive rate. Another way to save money on home insurance is to reduce home insurance claims. The more insurance claims you file, the higher your insurance rates are likely to be. To learn more about why insurance premiums increase, contact an insurance broker.

If you have any questions, contact one of our local branches.