Deduct Your Life Insurance
There are times when borrowed money or debts must be insured against the death of the borrower. Many financial institutions will require some form of insurance protection (
- The lender must require the assignment of the policy as collateral for the loan.
- The interest paid on the loan must be deductible for tax purposes, i.e. the money borrowed must be for the purpose of earning taxable income from a business or property.
- The deduction amount may not exceed the lesser of the premiums paid or net cost of insurance.
- Any premiums for insurance in excess of what is required for the loan are not deductible.
- The borrower must be the policy owner.
If these conditions are not met, the premiums may not be tax deductible.