Life Insurance on Your IRS Return: How Do You Report It?

Is life insurance included in the IRS?

This is one of the most frequently asked questions when filing a tax return. And why? Because, unlike in the past, It is no longer possible to claim life insurance as a deduction on your income tax return to qualify for a tax deduction.

Currently, there are several exceptions to this rule and various related deductions. Whether it’s required (such as when taken out with a mortgage) or optional, life insurance is a common solution for Portuguese families, so it’s important to be well-informed about the exceptions!

To that end, we’ve prepared a guide in which we explain the tax benefits of life insurance and provide a detailed overview of the exceptions to tax deductions. But we go a step further and also present How to Report Life Insurance on Your Tax Return and How You Can Save Money with EXS Seguros.

Who can claim a tax deduction on their income tax return for life insurance and home insurance?

Before moving forward, it’s important to understand what life insurance is.

When activated, this plan can be used to pay for your expenses, such as housing, loans, medical bills, or your children’s school tuition. In other words, it provides financial protection for you and your family.

It is because of this financial security that life insurance is a very common product. And until recently, you could combine this protection with the benefit of having these expenses count toward your income tax (IRS) deductions. However, these insurance expenses are no longer eligible for deductions, except in specific cases, namely:

• workers in high-wear-and-tear occupations;
• people with disabilities.

However, there are requirements and limits in these specific cases for life insurance to be included in the IRS. As such, it is necessary to understand these exceptions to determine whether it is possible to save with a life and home insurance.

Find out more below.

Can workers in physically demanding jobs claim a deduction for life insurance?

According to Article 27 of Decree-Law No. 82-E/2014, in the Personal Income Tax Code (CIRS), “The following are considered high-wear-and-tear occupations: athletes, as defined in the relevant regulatory instrument; miners; and fishermen”.

Therefore, to be eligible for income tax deductions Only professional athletes, miners, and fishermen are considered eligible. Other professions that are classified by Social Security as physically demanding and qualify for early retirement are not eligible for these tax benefits.

These workers may deduct 100% from their life insurance premiums, provided that the policy includes coverage for death, disability, or retirement after age 55.

In addition, for life insurance premiums to be tax-deductible on the IRS return, They cannot guarantee payment of any outstanding principal during the first five years, whether through redemption or an advance.

The deduction limit is 5 times the amount of the Social Assistance Index (IAS). In 2023, the IAS is €480.43, resulting in a maximum deduction of €2,402.15.

How do tax deductions for people with disabilities work?

People with disabilities can deduct 25% from the premiums paid for life insurance on their income tax return, provided that they cover only the risks of death, disability, or retirement due to old age.

However, the Article 87 of the IRS Code provides that This deduction may not exceed 15% of the total tax amount. To qualify for this category, a person must have a degree of permanent disability of 60% or higher, as determined by the competent authority.

This is a way to ensure that people with disabilities have access to tax benefits that provide them with greater financial protection and security in the future.

Is a retirement savings plan in the form of an insurance policy tax-deductible on the IRS return?

If you have life insurance that contributes to your retirement, it is considered a Retirement Savings Plan (PPR).

In these cases, according to the Article 21 of the Tax Benefits Statute, you can claim a deduction of 20% for insurance on your IRS return. However, there is a maximum limit on this deduction, as you can see in the following table:

What are the tax deductions for other types of insurance?

It is important to know that not all insurance premiums are tax-deductible on your annual income tax return. Some types of insurance, such as life insurance and mortgage insurance, do not provide any tax benefits.

However, as we saw earlier, there are exceptions, such as life insurance for workers in high-wear-and-tear occupations.

Therefore, it is essential to be informed about the specifics of each type of insurance to determine whether or not they are eligible for an income tax deduction. Learn more about the types of insurance that qualify for an income tax deduction.

Health Insurance

The IRS Code allows for an IRS deduction under code 15% for premiums paid with health insurance, with an overall limit of 1,000€.

However, please note that the Tax Authority will only allow the premium to be deducted if the health insurance plan covers only health risks. If it includes additional coverage, it is no longer eligible for the specific deduction for health expenses.

Car nsurance

O auto insurance It does not offer any income tax benefits. Although these expenses are recorded under “General Household Expenses,” the amount will not have a significant impact on your budget.

Home Insurance

O home insurance It cannot be deducted on your income tax return.

The Tax Authority only allows deductions for mandatory insurance, such as fire insurance. If you have this type of insurance, you can report it on Schedule F, along with your property income.

Find out how to save on insurance with the EXS brokerage firm

Although the Tax Benefits of Life Insurance Even though these costs may have decreased, this is still an essential plan for ensuring your family’s financial security in the event of disability or death.

That’s why choosing the best life insurance policy for you is crucial to ensuring that your needs and budget are met. To do so, you can count on the help of EXS Seguros. With 26 years of experience, EXS Seguros works with the most competitive insurance companies in Portugal to find the best life insurance policy for you.

Simply run a free simulation, and we’ll prepare a personalized quote based on an analysis of the plans offered by the following insurers: Advancecare, ARAG, Asisa, Caravela, Fidelidade, Liberty Seguros, Lusitania Seguros, MAPFRE, Médis, MetLife, MGEN, Multicare, Popular Seguros, PRÉVOIR, Real Vida Seguros, Saúde Prime, Tranquilidade, Una Seguros, Victoria, and Zurich. To use the our free simulator For insurance, simply enter your information, and our expert advisors will contact you to provide further guidance.

In addition, throughout the term of your policy, you’ll also have a dedicated advisor available to assist you with any questions, including tax benefits related to your policy.

Count on EXS to help you find the best life insurance and protect what matters most to you!