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Are life insurance premiums tax-deductible?
You probably can't write off your premiums — unless you're a business owner in specific circumstances.
In most cases, life insurance premiums aren’t tax-deductible — even for individuals or businesses who can deduct other kinds of insurance. But you might be able to write your premiums off as a business expense if the coverage is an employee benefit.
Find out whether life insurance premiums are taxable for these key groups
Whether or not life insurance is taxable will depend on which of the following groups you find yourself in.
Unfortunately, life insurance premiums paid by individuals are not tax-deductible. That’s because life insurance policies are considered personal expenses — so they’re not eligible for tax deductions.
Self-employed and sole proprieties
In most instances, self-employed individuals and sole proprietors are treated the same way for tax purposes – which is the case when it comes to deducting life insurance premiums. If you’re self-employed or a sole proprietor it might be easy to think that life insurance can be written off as a business expense, but that’s not necessarily the case. The Canada Revenue Agency (CRA) won’t view life insurance as a necessary business expense in most scenarios, so you won’t be able to deduct any premiums you paid for coverage.
If an employer paid the life insurance premiums on a group plan, then the premiums are tax deductible. You’ll still have to show that the expenses are a reasonable business expense.
If the business is a beneficiary or receives any type of compensation when the employee or an employee’s dependent dies, the premiums are not deductible. This includes business-owned life insurance policies taken out on behalf of employees. Though this type of insurance can provide protection against the loss of a key employee, monthly premiums are not tax-deductible.
Compare quotes from top life insurance companies
For the most part, life insurance premiums are not tax-deductible, but there are a few exceptions. If you’re an individual or a business owner, it’s worth consulting a licensed accountant for any tax-related questions, as they can offer the most accurate advice based on your situation, and help get all of your eligible deductions.
When you’re ready to purchase a policy, compare life insurance providers to get the best possible deal for your needs.
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