When the time comes to file the Income Statement, it is normal for many people to have doubts about how certain services or products that we have contracted are taxed. For example, it may be the case of life insurance taxation in your Income Statement. Does this deduct? And if so, when and how is it possible to deduce it? We will answer all these questions below.
Life insurance in the income statement: when and how it can be deducted
If you have contracted life insurance, you should know that you can deduct it in your statement. However, for this, a series of requirements must be met, since it is not always possible to do so.
In fact, There are only three specific cases in which this insurance is tax deductible in taxation before the Treasury.
When does life insurance deduct from the Income Statement?
As we have mentioned, life insurance deducts taxes on your statement, but only in certain cases.
The cases that must be given in order to obtain this deduction are the following.
savings life insurance
One of the opportunities in which it is possible to deduct life insurance in the Income statement is when it is a savings life insurance. That is to say, combined insurance between death coverage (may or may not also include the disability benefit) and a savings plan.
Among these insurances are Individual Long-Term Savings Insurance (SIALP), as well as the Insured Pension Plans (PPA).
Mortgage-linked life insurance
Undoubtedly, this is one of the most common cases in which people proceed to deduct their life insurance in their Income Statement.
However, in general, it is an essential requirement to do so, have signed the mortgage before January 1, 2013since those mortgage loans that were signed after that date, can no longer enjoy this deduction.
Life insurance for self-employed
The third case in which life insurance is deductible in the Treasury is that it is contracted as insurance for the self-employed.
This is the The only way for an individual to deduct this policy if it is not linked to a mortgage or a savings plan.
Deduction in life insurance: how much do you deduct in the declaration?
The deduction corresponding to life insurance will differ depending on whether it is a savings life insurance, one linked to your mortgage or one for the self-employed.
Let’s look at each case separately.
How much savings life insurance deducts
In this case, the tax reduction of the life insurance linked to the savings plan will differ depending on the type of policy.
- If it’s about Individual Long-Term Savings Insurance, these are tax free if they are maintained, at least, for 5 years without taking money from it. In addition, it is also a requirement that the annual contribution does not exceed 5,000 euros. In the event of not complying with the contribution or if redemption occurs before the aforementioned period, the entity will have to withhold or make the corresponding payment on account of the positive capital gains that have been obtained.
- In the Insured Pension Plans and dependency insurance, the insurance premiums are automatically deducted from the personal income tax base. This will be from 30% of insured work income, with a maximum of 8,000 euros. Other types of deductions can also be obtained if these cases occur:
- When the contributions are made in favor of a family member with a disability: up to 10,000 euros of deduction in life insurance.
- When the spouse of the insured earns less than 8,000 euros: in this case it would be up to 2,500 euros to deduct.
How much does life insurance linked to the mortgage deduct?
As established in our law, there is the possibility of deducting up to 15% of all the expenses that are destined to the purchase of a house. This includes the mortgage payment, as well as the insurance premiums that were linked to it, such as the life policy.
However, in order to take advantage of this tax advantage, it is essential that the purchase of the home was carried out before 2013.
In this case, life insurance deducts, at most, against a total of expenses of 9,040 euros.
For example, if you have a mortgage for which you are paying 8,300 euros per year, 320 for home insurance and 180 for life insurance linked to the mortgage, you can deduct only 15% of the total of these expenses. That is, 15% of 8,800 euros, which would be 1,320 euros of deduction.
Since the maximum would be 9,040 euros in sum among all total expenses, a maximum 15% deduction would also be applied to that amount, so, in any case, it is only possible to deduct up to 1,356 euros.
However, it should be noted that both in Navarra and in the Basque Country, the deduction of life insurance that is linked to the mortgage is different from the rest of the country in some aspects.
- In the case of Navarra, the deduction is extended to homes that were acquired up to January 1, 2018.
- For its part, in the Basque Country, it is possible to deduct up to 18% of expenses. Also, regardless of the date of home purchase.
To finish talking about the mortgage life insurance deduction, it is essential to remember that, if there are two holders of the same, it is highly recommended not to file the joint income statement, but individually, since both can be deducted a life insurance amount.
How much life insurance for the self-employed deducts
For this case it will be possible to deduct, from the premiums of this insuranceup to a maximum of 500 euros.
In the event that the person taking out this insurance is a self-employed person with some disability, that amount is extended to a total of 1,500 euros.
How to deduct life insurance on the income statement
To carry out the deduction of life insurance in personal income tax, you will have to complete the corresponding box, depending on the type of policy you have contracted.
Most of the time, life insurance is automatically deducted in the Renta Web program of the State Tax Administration Agency.
However, below is how life insurance returns and premiums are deducted.
- Savings life insurance. SIALPs, when they meet the conditions for which they are tax-exempt, will not be included in the return. If you have failed to comply with the requirements that exempt you from not paying taxes, the AEAT Web Income program will automatically include them as income from movable capital, within boxes 0026 and following of your return. In the case of PPAs, the same program automatically deducts them from the tax base, this being reflected in boxes 0492 and following.
- Mortgage life insurance. The premiums for this insurance will be reflected in box 0200 of the statement, adding to the payments made for the mortgage loan. These are indicated in boxes 0698 and 0699, corresponding to deductions for the acquisition of the habitual residence.
- Life insurance for the self-employed. The self-employed can deduct life insurance premiums when they are in the direct estimation tax regime. The amounts will have to be indicated, in this case, in box 0200 of the declaration.
How life insurance is taxed in the collection of compensation
One issue should be clarified. When the policyholder and the beneficiary of the life insurance are the same person. This must be reflected in the Income statement as “Performance of movable capital”.
However, In the case of different people, this must be reflected in the Inheritance and Gift Tax.
On the other hand, you have to pay close attention to how life insurance is collected in the event that the person is a beneficiary of one of them, since this will change the way it is taxed.
If it is collected in the form of immediate life annuities
In these cases, what is stated in article 25.3 a) 2º of the Personal Income Tax Law will be followed. In this article are exposed certain percentages to be applied to each annuity depending on the age of the annuitant at the time the income is constituted, remaining constant during its validity. Those percentages correspond to:
- 40% for people under 40 years of age.
- 35% for ages between 40-49 years.
- 28% for ages 50-59 years.
- 24% for ages between 60-65 years.
- 20% for ages between 66-69 years.
- 8% for 70 years or more.
If it is collected in the form of capital
It will be necessary to pay taxes for the difference between the amount that has been received and that of the premiums that have been paid.
It is taxed to 21% when the amount is less than 6,000 euros, 25% for amounts between 6,000 and 24,000 euros, and 27% if the amount is greater.
If it is collected in temporary immediate income forms
In these cases, taxation is carried out following the provisions of article 25.3 a) 3 of the Personal Income Tax Law.
According to the same, the income from movable capital will be considered the result of Designate specific percentages for each annuity based on the duration of that income. These percentages would be:
- 12% when the rent lasts 5 years or less.
- 16% if the duration is between 5-10 years.
- 20% for rents with a duration of 10-15 years.
- 25% if the income lasts more than 15 years.