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Did you know your life insurance premium can be deducted 😍😍 if you are a rental property owner.

Income Tax Act Reference: Paragraph 20(1)(e.2)

Under paragraph 20(1)(e.2), a taxpayer may deduct premiums payable on a life insurance policy if all the following conditions are satisfied:
1. Policy Assignment: An interest in the life insurance policy is assigned to a restricted financial institution (e.g., a bank, trust company, or credit union) as collateral for a loan.
2. Loan Purpose: The loan is used to earn income from a business or property.
3. Lender Requirement: The assignment of the policy is required by the lender as a condition for granting the loan.

When these conditions are met, the deductible amount is limited to the lesser of:
• The premiums payable by the taxpayer under the policy for the year; and
• The net cost of pure insurance (NCPI) under the policy for the year.

Furthermore, only the portion of this lesser amount that reasonably relates to the amount owing under the loan during the year is deductible.

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