Employers may choose to offer life, health and/or disability insurance to their employees. Should your business offer these benefits? Will your company’s insurance expenses be tax deductible?
- Group Life insurance is term insurance with your company holding the master contract and coverage extending to your employees. It’s relatively inexpensive and usually garners high participation among employees. If a life insurance policy is owned by your employees, but the premiums are paid by your company, you may deduct the premiums against business income as long as the premiums are a reasonable business expense. If you have shared ownership of the policy with your employees, the premiums are not tax-deductible.
- Group Health insurance plans provide coverage (supplemental to government health care plans) for a company’s employees at a reduced cost. If the health insurance policy is owned by your employees, but the premiums are paid by your company, you may deduct the premiums against business income as long as the premiums are a reasonable business expense. Premiums are not deductible if paid for shareholders who are not employees.
- Group Disability insurance provides a percentage of pre-disability income (for a specified period of time) when an employee is unable to work due to illness or injury. Typically employers purchase plans that cover 50 to 60 percent of income. Disability insurance premiums are paid with after-tax dollars, but the benefits are received tax-free.
As business insurance issues are complex and convoluted, talk to your accountant before claiming a tax deduction for life, health or disability insurance premiums offered to your employees.
Not sure whether you can claim the life, health and/or disability insurance premiums you offer your employees, contact Cook and Company Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook and Company use their experience, knowledge and expertise to help your business. Contact us for a complimentary consultation.
References:
- https://turbotax.intuit.ca/tips/deductible-life-insurance-premiums-285
- https://www.sunnet.sunlife.com/files/advisor/english/PDF/Are_Insurance_Premiums_Deductible.pdf
- https://www.sunlife.ca/ca/Tools+and+Resources/Money+and+Finances/Understanding+life+insurance/Are+your+insurance+premiums+tax-deductible?vgnLocale=en_CA
- https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/group-term-life-insurance-policies-employer-paid-premiums.html
