In Canada, in most cases, life insurance premiums are not deductible.
There are a couple of exceptions:
1. If the insured is applying for a loan and the institution lending the funds requests that he or she buy life insurance as collateral, a portion of the premiums on that policy qualify as a deductible expense (the Net Cost of Pure Insurance)
2. Where a donor donates a life insurance policy to a charity or a charity takes out a policy on the donor’s life, the premiums paid by the donor will be considered a charitable donation eligible for a charitable tax credit (for individuals) or deduction (for corporations).
Even though it is not deductible there are several situations where corporate owned life insurance should be considered.
For example:
The insurance is required to fund a buy-sell agreement, there will be more than one insured shareholder. There will probably be different ages and unequal premium rates. There may also be cost differences among shareholders due to underwriting premium ratings. Corporate-owned policies help to equalize the resulting premium differences.
The taxpayer with the lowest tax rate requires less pre-tax income to pay the premiums; their dollars are “cheaper”. In many cases that could be the corporation.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
(Since tax laws vary by jurisdiction and do change, check with your local tax and professional advisors.)
Note: The information contained in this article is intended to provide general guidelines only. The application and impact of the law can vary widely from case to case based on the specific or unique facts involved. Accordingly, the information in this article is not intended to serve as legal, accounting or tax advice. Users are encouraged to consult with their professional advisers for advice concerning specific matters before making a decision.
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There are a couple of exceptions:
1. If the insured is applying for a loan and the institution lending the funds requests that he or she buy life insurance as collateral, a portion of the premiums on that policy qualify as a deductible expense (the Net Cost of Pure Insurance)
2. Where a donor donates a life insurance policy to a charity or a charity takes out a policy on the donor’s life, the premiums paid by the donor will be considered a charitable donation eligible for a charitable tax credit (for individuals) or deduction (for corporations).
Even though it is not deductible there are several situations where corporate owned life insurance should be considered.
For example:
The insurance is required to fund a buy-sell agreement, there will be more than one insured shareholder. There will probably be different ages and unequal premium rates. There may also be cost differences among shareholders due to underwriting premium ratings. Corporate-owned policies help to equalize the resulting premium differences.
The taxpayer with the lowest tax rate requires less pre-tax income to pay the premiums; their dollars are “cheaper”. In many cases that could be the corporation.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
(Since tax laws vary by jurisdiction and do change, check with your local tax and professional advisors.)
Note: The information contained in this article is intended to provide general guidelines only. The application and impact of the law can vary widely from case to case based on the specific or unique facts involved. Accordingly, the information in this article is not intended to serve as legal, accounting or tax advice. Users are encouraged to consult with their professional advisers for advice concerning specific matters before making a decision.