Can life insurance be declared on tax returns?

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Can life insurance expenses be deducted from IRS?  

When deducting expenses for IRS, the question arises regarding insurance: Are insurance premiums also deductible? Can I declare my life insurance on IRS? The general answer is no... But you can achieve it, if included in exceptional cases.

As a rule, the value related to insurance is included in the category of Family General Expenses, but there are occasional situations where it is possible to deduct expenses for life insurance in your IRS declaration.

So, if in 2023 you have taken out a life insurance policy, within the scope of mortgage credit or not, in 2024 know that you can only include this expense in your IRS deductions if: you have a rapid wear profession or have a disability equal to or greater than 60%.

There are two exceptions: professions with high turnover or disabled workers.

The first exception applies to professions with rapid wear and tear, such as sports practitioners, miners, or fishermen.

If you have a fast-wearing profession, you can deduct 100% of the premiums paid on life insurance. But beware: the insurance in question must cover the risks of disability, death, or retirement due to old age (after 55 years of age).  

However, in order for the expenses to be deductible in IRS, life insurance policies cannot guarantee the payment of debt capital, through surrender or advancement, in the first five years.

Note that the deduction limit is five times the Social Support Index (IAS), which corresponds to 480.43 euros in 2023.  

That is, the maximum deductible amount will be: 5 x 480,43 = 2.402,15 euros.

And the second exception are individuals with a disability degree equal to or greater than 60%. These can deduct 25% of the value of life insurance premiums, or contributions to mutual associations, provided they exclusively cover the risks of death, disability, or retirement due to old age. In addition, the limit is 15% of the total collection value.

In cases where life insurance is for retirement due to old age, for example in private pension plans (PPR), the limit to deduct is 65 euros for unmarried individuals, and 130 euros for married or legally separated individuals.

You can also deduct PPR in the form of insurance in IRS.

In this situation where your life insurance contributes to retirement by old age, it falls into the PPR category. And, according to Art. 21 of the Statute of Tax Benefits, Retirement Savings Plans (PPR) can also be deducted from IRS. The deduction corresponds to 20% of the premium paid, in the year in question, but with limits.

These limits are related to the taxpayer's ages, with each single taxpayer or for each spouse, the following maximum deductions are limited:

• Limit of 400 euros per taxpayer under 35 years old, when 2 thousand euros are invested in the PPR;
• Limit of 350 euros for taxpayers aged 35 to 50 years old, when 1,750 euros are applied to the PPR;  
• And a limit of 300 euros per taxpayer from 50 years old, when 1,500 euros are applied to the PPR.

If I fall under the exceptions, how do I declare life insurance on my IRS?

If you fall into the exceptions explained above, you must then declare the life insurance prize in your IRS. But how?

You must declare in Section 7 of Annex H of your IRS declaration. Considering that expenses on insurances appear in your E-fatura account, which you must check beforehand to confirm if the values are correct.

In our PPR, the managing entity transmits to the Tax Authority the amount invested by the taxpayer in the year in question, so it is already automatically included in the annex. If you choose the tax benefits in your PPR, be aware that you may suffer penalties in case of early withdrawal, so you should find out if this is your case. In any case, you will have to declare the premium of your life insurance in the IRS.

Still have questions? Contact Poupança no Minuto, insurance brokers, and clarify all your doubts about your life insurance!