Insurance Expenses on Your T2125
Business liability, E&O and property premiums go on Line 8690. Car insurance, home insurance, health plans and life insurance each go somewhere else — or nowhere.
Line 8690 is for insurance that protects the business itself: liability if a client sues, professional errors and omissions, and the equipment, inventory and premises you use to earn income. The CRA's own wording is "commercial insurance premiums" on the buildings, machinery and equipment you use in your business.
One self-employed household's policies can land on four different lines. Car insurance goes in your motor vehicle expenses (line 9281) at your business-use percentage. Home insurance goes in the business-use-of-home calculation (Part 7, line 9945) at your workspace percentage. Personal health and dental plan premiums can be deductible on line 9270 as a private health services plan, within dollar limits. Life insurance and personal disability insurance are generally not deductible at all.
There is one tax detail people often get wrong: insurance sold by insurers, agents and brokers is exempt from GST/HST, so there is no input tax credit to claim on a premium. Some provinces add their own tax instead. Ontario charges 8% retail sales tax (RST) on most premiums. That tax is not recoverable, so it becomes part of the deductible premium.
What You Can (and Can't) Deduct
Know exactly what belongs on Line 8690 — and what the CRA says doesn't qualify.
What Qualifies
- Commercial general liability insurance for your business
- Professional liability / errors and omissions (E&O) insurance, including coverage your regulator requires
- Insurance on business equipment, tools, inventory and rented business premises
- Business interruption coverage on a commercial policy
- Product liability insurance for goods you sell
- Cyber liability insurance for client data
- Supplementary business insurance on your vehicle (goes on line 9281, but is not reduced by personal use)
- Life insurance premiums, in part, only where a lender requires the policy as collateral for a business loan (Interpretation Bulletin IT-309)
Does NOT Qualify
- Life insurance premiums in general — they are not deductible
- Disability (income-replacement) insurance on yourself — a personal expense, not deductible
- Regular vehicle insurance on Line 8690 — it goes on line 9281
- Home insurance on Line 8690 — the workspace share goes in Part 7 (line 9945)
- Personal health and dental premiums on Line 8690 — they may qualify on line 9270 as a private health services plan, or as a medical expense on your return
- GST/HST on premiums — there is none to claim, because insurance is GST/HST-exempt
Rules & Limits
Special CRA rules and percentage limits that apply to insurance.
Special Rules
No GST/HST Input Tax Credit on Insurance
Heads upInsurance services sold by insurance companies, agents or brokers are exempt from GST/HST, so a premium has no GST/HST for you to recover. If you are a registrant, there is nothing to claim on your GST/HST return for insurance.
Guide T4002, GST/HST input tax credits and exempt goods and servicesOntario 8% RST on Premiums
Heads upOntario applies 8% retail sales tax to premiums under taxable insurance contracts, including insurance on property located in Ontario. Exemptions include compulsory auto insurance and individual life insurance. The RST is a provincial tax, not GST/HST, so it cannot be claimed as an input tax credit; deduct it as part of the premium.
Ontario Ministry of Finance, Retail Sales Tax — Insurance and Benefits PlansLife Insurance: Only a Limited Collateral Exception
AdvantageIn most cases you cannot deduct life insurance premiums. If a lender requires you to assign a life policy as collateral for a loan related to your business, you might be able to deduct a limited part of the premiums. The deductible part is limited, not the whole premium.
Guide T4002, Line 8690; Interpretation Bulletin IT-309Disability Insurance on Yourself
Heads upThe CRA treats premiums you pay for a policy that replaces your own lost income as a personal or living expense: not deductible, and the benefits are not included in your business income. Business overhead expense insurance is a different product, and the CRA treats it differently. Confirm how your policy is treated before you claim anything.
CRA technical interpretation 2004-0104731E5 (February 17, 2005)Health and Dental Premiums: Line 9270, With Limits
AdvantageIf you are actively in business and self-employment is more than 50% of your income (or your other income is $10,000 or less), premiums to a private health services plan are deductible. With no employees, the limit is $1,500 a year for yourself and each household member 18 or older, and $750 for each household member under 18, prorated for partial years.
Guide T4002, Premiums to a private health services planMixed-Use Policies
Heads upIf one policy covers both personal and business property, deduct only the business share, and keep a note of how you split it. For a car, the regular policy follows your business-use percentage on line 9281. Supplementary business coverage added to that policy is deductible in full.
Guide T4002, Line 9281Percentage Limits
| Rule | Limit |
|---|---|
| Business liability, E&O, equipment and premises insurance | 100% |
| Vehicle insurance | Business-use % |
| Home insurance | Workspace % |
| Private health services plan (no employees) | Up to $1,500 / $750 |
| Life insurance | 0% |
Real-World Examples
See how different professionals use Line 8690 deductions in practice.
Worked example: one designer, seven policies
E&O $1,100 + 8% RST = $1,188 and a business-equipment policy $300 + RST = $324, both on line 8690. Car insurance $2,400 at 40% business use = $960 on line 9281. Home insurance $1,620 incl. RST at a 10% workspace = $162 in Part 7. Health and dental plan for herself, $1,320 for the full year, is under the $1,500 limit, so all of it goes on line 9270. Term life ($600) and personal disability ($1,800): $0.
$9,252 in premiums
$1,512 on Line 8690 (plus $2,442 on other lines)
Commercial general liability
Annual commercial general liability policy covering on-site accidents and damage to client property.
$3,200
$3,200 (100%)
E&O insurance required by the regulator
Errors and omissions coverage required by the provincial real estate regulator. The policy covers only professional work, so the whole premium is a business expense.
$1,850
$1,850 (100%)
Life policy assigned to the bank
The bank required a $250,000 term life policy to be assigned as collateral for a $150,000 equipment loan. Only a limited part of the premium can be deducted, based on the rules in IT-309 — work it out with your accountant rather than deducting the whole premium.
$900 premium
A limited part only
Common Mistakes to Avoid
These errors on Line 8690 can trigger a CRA review — here's how to get it right.
Claiming an input tax credit for "HST" on an insurance premium
Insurance is GST/HST-exempt, so there is no ITC. In Ontario the tax line on a premium is 8% provincial RST, which you deduct as part of the premium on your T2125 instead of claiming it on your GST/HST return.
Putting vehicle insurance on Line 8690
Vehicle insurance is a motor vehicle expense on line 9281, multiplied by your business-use percentage like fuel and repairs.
Putting home insurance on Line 8690
Home insurance belongs in the business-use-of-home calculation (Part 7, line 9945) at your workspace percentage, alongside heat, electricity and maintenance.
Deducting your own disability insurance premiums as a business expense
Premiums for a policy that replaces your own lost income are a personal or living expense in the CRA's view, so they do not belong anywhere on your T2125.
Deducting the full annual premium when the policy year straddles your year-end
A prepaid premium that covers part of next year is deducted in the year(s) it covers if you use the accrual method. Under the cash method, you cannot deduct an amount that relates to a tax year two or more years after the year you paid it.
Commonly Confused Categories
These categories are often mixed up with Insurance. Here's the difference.
Motor Vehicle Expenses
Vehicle insurance belongs on line 9281 and is reduced by your personal-use share. Supplementary business insurance on the vehicle is the exception: it is deductible in full.
Business-Use-of-Home Expenses
Home insurance goes into the Part 7 calculation with your other home costs and is multiplied by your workspace percentage.
Other Expenses
Health and dental premiums for yourself and your household can be deductible as private health services plan premiums on line 9270, within the annual limits — not on Line 8690.
Salaries, Wages & Benefits
If you have employees, premiums you pay for their sickness, accident, disability or income insurance plans are an employee-benefit cost, not business insurance.
Sample Receipt Walkthrough
See how ScanForTax processes a typical insurance expense.
Commercial insurance broker
2026-01-15
Ontario
How ScanForTax categorizes this
ScanForTax reads the premium and the $192.00 tax line, keeps that tax separate from GST/HST, and categorizes the policy as Insurance (Line 8690). Because insurance is GST/HST-exempt, this $192 is Ontario's 8% retail sales tax on the premium. There is no input tax credit, so the full $2,592.00 is the business expense. If this were a car policy, it would belong on line 9281 instead.
Tax Calculation Breakdown
See the exact tax math for a typical insurance purchase.
$2,400 commercial liability premium (Ontario)
Ontario
Insurance is exempt from GST/HST, so nothing on this invoice is recoverable as an input tax credit. Ontario's 8% retail sales tax on the premium is a cost of the policy: the full $2,592 goes on Line 8690. Compare an advertising or equipment purchase in Ontario, where the 13% HST is usually fully recoverable for a registrant.
Frequently Asked Questions
Is there GST or HST on business insurance?
Can I deduct life insurance premiums?
Can I deduct my own disability insurance?
Where does vehicle insurance go?
Can I deduct my health and dental plan as a sole proprietor?
Does ScanForTax know which line an insurance receipt belongs on?
Where Line 8690 sits on the full form: T2125 line by line →
Related Professions
Profession-specific guides that frequently use Insurance deductions.
Tax Guides by Province
See how tax recovery works for insurance expenses in each province.
Sort Insurance receipts automatically
ScanForTax files each receipt under T2125 Line 8690 and splits out the GST/HST you can claim back. First 15 scans free, no credit card required.