Can life insurance be deducted from your tax return?

When filing our tax return, we usually have doubts about if insurance is deductable. Although it is common to deduct health or car insurance, life insurance is not usually included in the tax return. This article explains the requirements for deducting life insurance and the tax benefits you can obtain.

First of all, it is important to be aware of the different types of mortgage-linked, since not all of them can be deducted. Life or life-risk insurance are those in which the beneficiaries receive the established capital in the event of death or disability.

Life insurance if you are self-employed

The deduction of life insurance will depend on your type of affiliation to the Spanish Social Security. That is, if you are a self-employed worker, you may deduct your life insurance even if you have taken out permanent or temporary disability cover. Provided that the limit does not exceed 500 euros a year.

Life insurance associated with your mortgage loan

If you are not self-employed, but you are employed, you can deduct your life insurance if it is associated with your mortgage. But an important detail is that it ONLY applies to mortgages signed before 1 January 2013, where homes are deducted from the tax return and thus you can add the life insurance policy to the deduction of your habitual home.

When you deduct your home's expenses, you can deduct up to 15% of the total expense, that is, you can deduct 15% of the sum including the mortgage payment, life insurance and home insurance.

This is applicable if the property is in Spain, and the loan is in the name of the life insurance holder.

Life insurance associated with a savings plan

Life-savings insurance or insured pension plans are taxed in the same way as pension plans.

The amount of the deduction is based on the age of the contributor. If you are under 50 years old, the maximum is set at €10,000. If you are over 50 years old, it is set at €12,500.

Policyholder and insured person of the life insurance policy

When the policyholder and the beneficiary are different people, the insurance will be subject to the Inheritance and Gift Tax. If they are the same person, it can be deducted in the Personal Income Tax return.

How do I include my life insurance in the tax return?

Regardless of your situation, if you are self-employed, if you are going to deduct the life insurance associated with your mortgage or if it is a savings plan, you must tick box 200 in the tax return, which corresponds to insurance premiums.

If the life insurance is associated with a savings plan, tick box 35.

Other requirements to deduct life insurance from your tax return

  • It must be taken out in your name or, failing that, in your spouse's, ascendant's or descendant's name.

  • Your life insurance's main cover must be the risk of death.

  • The policy's total premium cannot be higher than the limit established by the Spanish Tax Agency.

  • The insurance company must be authorised by the Bank of Spain. 

  • Proof that the payments of the premiums have been made from your bank account, and that you are up-to-date with the payments of your insurance.

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