9 ways your life insurance can be tax-free and tax-deductible
(2 min read)
Is your life insurance tax-free?
1) Are you the beneficiary of a life insurance policy and just received the life insurance payout?
Yes, the life insurance proceeds you received are tax free.
2) Did your investment account, also known as the cash value, in your personally owned whole life policy increase in value over the past year?
Yes, the growth and dividend you received in your whole life policy is tax free.
3) Did your investment account, also known as the cash value, in your corporately owned whole life policy increase in value over the past year?
Yes, the growth and dividend you received in your whole life policy is tax free even though your corporation owns your policy.
4) Do you have buy sell insurance? It protects the ownership that you and your business partners have in the company in case a partner suddenly passed away.
Yes, buy sell insurance is paid tax-free to your corporation if a partner passes away.
5) Do you own a life insurance policy with a registered charity listed as the beneficiary?
Yes, the life insurance proceeds will be paid tax-free to the charity and your estate will receive a tax credit for this type of donation.
Is your life insurance tax-deductible?
6) Were you required to get a life insurance policy as collateral for a loan you took out?
Yes, your life insurance may be tax deductible. Always best to speak to your accountant to ensure you are eligible based on CRA guidelines.
7) Did you use the cash value in your policy as collateral for a loan from a bank or lending institution?
Yes, your interest payments may be tax-deductible if you use the loan to earn income from your business or property. The loan itself is not taxable.
8) Did you borrow money from the cash value in your policy, through a policy loan?
Yes, your interest payments may be tax-deductible if you use the loan to earn income from your business or property.
9) Did you make annual or monthly insurance payments for a policy that you donated to a registered charity?
You would receive a tax credit from the charity for your payments throughout the year.
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