There are some insurance-related tax deductions you may not know about. Term insurance plans, among other plans, can be deducted from your tax. Therefore, it is imperative to know which of them qualifies for deductions.
Here are some insurance-related tax deductions you need to know.
- Term Insurance
Term insurance is an excellent option for those looking for tax savings investment. Any policyholder of this kind of insurance is usually eligible to obtain tax benefits in accordance with the Income Tax Act of 1961. Ideally, the term insurance plans provide the customer with tax deductions as per section 80C. Such a deduction covers premiums for the contributor, their spouse, as well as children. In case anyone else is included, a deduction won’t be available. Also, it is imperative to remember that this kind of deduction is permissible if the premium is below 10 percent of the assured sum.
- Health Insurance
With the health insurance policy, the insurer will take care of the cost of the insured person’s medical expenses in case they fall sick or are injured. However, under Section 80D of the 1961 Income Tax Act, deduction can be claimed for the premiums one pays toward their insurance policy. Deductions that are claimable under this Section include self and family, self and family + parents, self [senior citizen] and family + parents [senior citizens].
- Auto Insurance
If you are using your automobile for the purpose that relates to a business, you may be in a position to deduct a section of the insurance premium. Some individuals use their vehicles as an integral part of the business they have, and in such cases, the costs of insurance could be deductible at tax time. Therefore, a person can qualify for a deduction if they are self-employed and use their automobile for business purposes and if they are employed, and the employer does not plan to reimburse them for the expenses that relate to the business use of their car.
- Property Insurance
If you own property and claim rental on them, the homeowner insurance on the section of property that is used as rental becomes deductible. If there are many properties used for rental, then the homeowner insurance for the entire rental property becomes tax-deductible. However, you need to know that you cannot deduct the premiums you pay for your residence on your tax returns.
- Legal and Liability Insurance
If you are a self-employed taxpayer or you run a business entity, the premium paid for legal and liability coverage may be tax-deductible. However, in most cases, this kind of coverage is not carried as a separate policy but is included in other policies such as auto or property insurance. Therefore, you need to consult a tax expert before you can deduct the premium for this cover.
Bottom Line
Before making any deduction when filing your returns, you need to be certain that whatever you are deducting qualifies. If you are not sure, you can contact an account, auditor, or financial expert for advice.