With tax season upon us, a lot of us might be scrambling to determine if there are any last-minute deductions we can qualify for. In the case of home insurance in Ontario, there’s a retail tax – 8%. If we’re looking at property expenses, is there a way to deduct our premiums?
The answer is yes – depending on your circumstances. You can technically deduct your premiums from your income tax, but note that there are a few conditions you will be required to meet first, and different methods by which you can deduct your tax.
Is car insurance tax deductible in Ontario?
Short answer: Currently, the Canada Revenue Agency (CRA) allows self-employed individuals to deduct their car insurance premiums.
Long answer: Several qualifying individuals can have their car insurance premiums tax deduced. Those may include self-employed individuals, armed forces reservists, qualified performing artists, fee-basis provincial or local government officials, etc. In addition, these qualifying individuals may deduct not only their car insurance premiums, but a longer list of other “actual car expenses.” Those include the following list:
- Oil and gas
- Rental space
- Car repairs
- Registration fees
- Licensing fees
- Tire changes
- Parking fees
- Lease payments
The definition of a self-employed worker is as follows: one who works for themselves, not an employer, and chooses to be recognized as such (or in the event where the person is generating an income where a tax return must be filed.) That being said, more than just self-employed individuals may qualify to have their car insurance premiums tax deducted.
Note that there are some exceptions to what can be deducted. You will normally be able to deduct unreimbursed expenses by choosing either actual vehicle expenses (i.e, premiums and the items included in the list above) or standard mileage – but standard mileage will not allow you to deduct your premiums separately. You may, however, still be able to deduct parking fees and tolls.
Is home insurance tax deductible in Ontario?
There are some instances where you may be able to deduct your home insurance premiums, but you’ll have to meet certain conditions first. Home insurance tax deductions are more popular since the pandemic began, as many people have started working from home. If you work from home as an employee, you will be able to claim your home insurance premiums. You may also receive a personal deduction on your income taxes for a list of other property expenses.
You will be required to choose from two different options for claiming: detailed and temporary flat rate. Temporary flat rate allows you to claim $2 per day you worked from home between 2020 and 2022, but note that this deduction will cap out at $400 in the year of 2020 and $500 in both 2022 and 2021. You won’t be required to provide any documents for this claim.
Eligibility for the detailed method is as follows:
- You were required by your employer to work from home or COVID-19 caused you to work from home in the years 2020, 2021, and/or 2022.
- You used your home workspace to earn employment income and in order to hold meetings with employers, colleagues, or clients and/or worked from home 50% of the time in the years 2020, 2021, and 2022 for at least four consecutive weeks.
- You were required to pay home-office related expenses.
- You are planning to claim expenses directly used for work.
- You have received a signed and completed copy of Form T2200S or Form T2200 from your registered employer.
The detailed method allows you to deduct an actual amount that you paid for working from home, so long as you have kept all your documentation – including receipts and bills. You will be required to separate personal and work usage expenses. You can claim Internet, heat, water, electricity, home maintenance, and rent with this method.
Eligibility for the temporary flat rate method is as follows:
- You worked from home as a result of COVID-19 in 2020, 2021, and/or 2022.
- You want to claim home office expenses but not additional employment expenses on your income taxes.
- You did not receive reimbursement for home office expenses from your employer.
- You worked from home for at least half of the time during 2020, 2021, and/or 2022 for at least 4 weeks consecutively.
Note that temporary flat rate won’t deduct your home insurance from your personal income directly, as it’s majorly used to deduct home expenses, including electricity, Internet, and rent. However, you can consider your insurance premiums to be included within this amount – even if you’re not writing these premiums into your tax form.
The long and the short of it: you can technically deduct your car insurance and home insurance premiums on your personal income tax, but there are specifications and conditions you may be required to meet, first. You’ll also need to divide between your personal and business expenses in both circumstances. Moreover, there are different methods by which you can claim these expenses.
For answers to additional questions regarding home/auto insurance premiums, you can always discuss with Excalibur Insurance Group. Contact us today for more information.