Are Life Insurance Premiums Tax Deductible?

SHave you been thinking of ways to save up on your taxes? Read on to know whether you can do so with your insurance premiums and insurance proceeds.

by Jeanne Jampac, 21 November 2017

Can you really save on your taxes through your insurance premiums and proceeds?

\If you are a first-time insurance policy holder, you may already have a lot of financial questions, including tax deductions. Are life insurance premiums tax deductible? Are life insurance proceeds taxable? Interest in these matters is not new, especially now that the year is coming to a close. Whether you are employed or self-employed, ensuring that you cover all possible tax credits and deductibles before filing your income tax return should be of utmost concern to you. After all, we all want to save on taxes as much as possible.
To answer these questions, you must first acquaint yourself with the difference between insurance premiums and insurance proceeds. 

Life Insurance Premium VS. Life Insurance Proceeds

Life insurance is a contract with an insurance company that guarantees a sum of money to be paid upon the death of the insured, or after a given period. It is a mandatory employee benefit as provided by the Labor Code of the Philippines (Code).  
An insurance premium is the amount of money paid by the individual or employer to the insurance company. It may be paid in installments or in full, depending on the agreement between the insured and the insurer. On the other hand, insurance proceeds are the sum of money paid by the insurance company to the insured as the result of a claim. 

Are Life Insurance Premiums Tax Deductible?

Life insurance premiums are not tax deductible. Sec. 36(A)(4) of the Code explicitly states that premiums paid for any life insurance policy is not deductible. This means that any payment made to an insurance company should not be considered as an expense. It should not be used to reduce your taxable income. 

Are Life Insurance Proceeds Taxable? 

No, they are not. Life insurance proceeds are excluded from the gross income, as mandated in Sec. 32(B)(1) of the Code. This means that any proceeds or benefits received from insurance policies should not be included in the calculation of your gross income and are therefore exempted from taxation.

Plan Ahead and Save on Your Taxes

Filing of income tax returns may still be in April but it is high time that you already make an account of your income, expenses, and savings before the year ends. This way, you can balance your remaining payables and receivables, and determine whether you have to defer that to next year to lower your taxable income for the fiscal year. 
Your human resource department should be able to assist you if you have questions regarding your income tax return. Otherwise, you can read up on the Code or the BIR rules and regulations to ensure that you are aware of the items that can be credited or deducted.