Are Insurance Premiums Tax Deductible in Ontario & Canada?

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
• Depreciation
• 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?

For Self-Employed Individuals

If you are self-employed and use a portion of your home for business purposes, you can generally deduct a portion of your home insurance premiums (along with other expenses like property taxes, utilities, and maintenance) as a business expense. To do so, your home must be your principal place of business, or you must use the space exclusively for business and meet clients on a regular and ongoing basis. You will be required to separate personal and business usage expenses based on the percentage of your home used for business.

For Employees Working from Home

If you work from home as an employee, you may be able to claim some home-office expenses using the detailed method, but home insurance premiums are generally not deductible for employees. Eligible expenses for employees typically include a portion of utilities (like heat, water, electricity), rent, and minor repairs. To claim these expenses, you’ll need a signed and completed Form T2200 from your employer.

The “temporary flat rate method” for claiming home office expenses ended after the 2022 tax year and is no longer an option.

Eligibility for the detailed method for employees generally requires:

• You were required by your employer to work from home.
• Your home workspace was your principal place of work (more than 50% of the time for at least four consecutive weeks), or it was used exclusively for work and for meeting clients on a regular and ongoing basis.
• You paid home-office related expenses for which you were not reimbursed.

You must keep all documentation, including receipts and bills. You will also be required to separate personal and work usage expenses.

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.