The general rule is that you cannot deduct personal insurance premiums, including flood insurance premiums, on a personal residence. The Internal Revenue Service instead allows you to receive flood insurance benefits tax free and allows you to deduct flood damages as a disaster and casualty expense to the extent you are not compensated for your loss by an insurance policy. However, if you are insuring an income-producing property, or use the property in business and you are paying for flood insurance there, you may be able to deduct flood insurance premiums as a business expense.
Deductible Vs. Nondeductible Insurance Premiums
The IRS allows homeowners to deduct mortgage insurance premiums on their personal income tax returns. However, the IRS specifically prohibits homeowners from deducting other forms of insurance coverage on their individual tax returns, including fire and comprehensive coverage.
The IRS specifically allows you to deduct premiums you pay for business-related insurance, including flood insurance, fire insurance, comprehensive coverage policies, wind damage policies and any other property and casualty policy on your business property.
Business owners cannot generally deduct any payments they make to self-insure against various risks, nor can they take a deduction for loss of earnings due to illness or disability. They also cannot deduct life insurance premiums, with certain narrow exceptions for employee group term life insurance.
Claiming the Deduction
If you are a business owner, you can file a Form 1040 along with a Schedule C, if you own a pass-through entity such as a partnership, S-corporation, sole proprietorship or limited liability company. If you own a C-Corporation, you will list the premiums as an expense on your corporate income tax return.