The Insurance and Tax Advantages of a Home Security System

A very important, though often overlooked, benefit of a security system is that it can give you substantial savings on your insurance premiums and tax liability. In fact, it's not unusual for savings in these areas to largely offset the cost of installation and monitoring.

Reduce Your Insurance Premiums
Insurance companies know that monitored security systems help prevent losses. In fact, a home with a security system is far less likely to be burglarized than a home without a system. So most insurance carriers offer discounts on insurance premiums when you install or upgrade a security system. Depending on the type of system installed, this can mean savings of 5% to 20% or even more on your premiums.

Reduce Your Tax Liability
A home security system is usually considered a "capital improvement" on a home. If you make such an improvement you can add the cost to your home's adjusted cost basis at the time of sale. This reduces your capital gain and, therefore, your capital gains tax when you sell your home. (By the way, security systems are very popular with new home buyers, which will make your home easier to sell.)

At the same time, monitoring fees are normally eligible for treatment as a deductible business expense. This is also true if you are running a business out of your home, for that portion of the system that is protecting the "business area." (See your accountant for advice concerning your particular situation.)