Umbrella Policy Premium Deduction

9 Feb 2008 by Chetan Shah.

Umbrella (excess liability) insurance policy is a perfect way to have extra personal liability insurance. Particularly now a days when the chances of getting sued are higher. Umbrella insurance kicks in after the personal liability limits are exhausted on your homeowners or auto insurance policy. The cost of getting a $1Million coverage is around $150 dollars. As with any insurance policy, it is imperative to get this policy from a reputable insurance company.

From tax deduction perspective however, the umbrella policy premium is not deductible from your income tax return. Much like homeowners insurance you cannot deduct umbrella policy premium. However, if you have a rental property and you purchased the umbrella policy because of the rental property then you may claim the insurance premium as part of your expenses on Schedule E of Income Tax return. The policy should itemize how much premium is being charged due to the rental property. Only the premium towards your rental property can be claimed as an expense on Schedule E.

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