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Umbrella policy and home office deduction

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  • Umbrella policy and home office deduction

    Hello Board,


    I was updating my umbrella policy and they asked if my apartment was a commercial property or if any business was conducted there. I answered that it was not a commercial property and that no business took place there.

    I will be starting to moonlight and was thinking of having a home office and claim a home office deduction. But then, it occurred to me that this may be contrary to the terms of my umbrella policy.


  • #2
    It will .
    Why would you need a home office to moonlight?


    • #3
      yes. if you use any part of your home for a business there are other moving parts....and lots of people like to do this when they are 1099 so they have more deductions (they then deduct the space, the computer, internet, etc).  It changes the terms of homeowner insurance and umbrella (not sure about renters insurance, but worth checking). Read the fine print!  I would be quite sad for a home to have a fire and not be covered because it was your office you didn't declare  to the insurance company.....You many need to file with the county/city and pay a business license to operate out of your home/residence  your apartment complex may have guidelines and a fee....doesn't matter what you are doing...if you claim you are self-employed and your home is your office....the license may negate some of the also changes how the depreciation is calculated when you sell your home (for the worse..i realize you are in an apartment...i'm just laying out the pros/cons), depending how you claimed the depreciation over the years.....Before the IRS had a bigger budget with more employees, a home office was a huge red flag for an audit...the IRS just doesn't have the manpower anymore, but it still is an auditable event.


      • #4
        It may not necessarily be contrary to the terms of your PUP, but you will have to declare it and find out if the rates change or if the office is excluded. Since you likely are getting the policy through your homeowner's carrier, your notification should fully update for liability purposes. However, if you are acquiring your PUP through your vehicle insurance carrier, you need to be sure to notify your homeowner's carrier.
        My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
        Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clients


        • #5
          Obviously it would be worth reading the policy description, but my first instinct is that the Insurance company really cares to know if you routinely have all sorts of people coming on your property routinely. If you conduct business out of your home office but this does not involve people coming on the property I doubt they’d care.


          • #6
            Thank you for your responses. I will be checking with both insurances but it may end up being more trouble than it is worth claiming the office deduction. The reason why I would use it is that I work in a place that does not provide office space so I do notes/chart reviews at home.




            • #7
              I ran this by my property & casualty agent and he said home offices should be disclosed to the personal carrier.  He did say as long as there is no foot traffic, the carrier usually doesn't have an issue.  I don't think a home office triggers the need for a commercial property policy.  You probably should run it by the carrier if you decide to do home office but let them know you aren't seeing patients in the house.


              • #8
                WCICON24 EarlyBird
                I did end up calling both carriers. The renter's insurance added the information to my policy and since there is no foot traffic, there is no change in premium. Umbrella policy also did not change. Thanks!