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Taxation ch 4
Taxation: CriticaI Illness
Tax Treatment of critical illness
Provisions regarding CI
The income tax act does not include any specific provisions regarding critical illness policies. the courts have also never had the opportunity to rule on the tax treatment that is applicable to this type of policy.
Provisions regarding CI
There are still differences between policies owned by individuals, group or corporation
Individual policies
Individual policies
- policy holder is an individual, beneficiary is an individual and the payor is an individual
- premiums are not deductible
- benefits not taxable
- policyholder is a corporation, beneficiary is a corp. payor is a corp.
- premiums are not deductible
- benefits are non taxable
- policyholder is a corp. beneficiary is an employee and the payor is the corp.
- premiums are deductible
- benefits are non taxable but the company has tax deductions as compensation
Group insurance plan
Group insurance plan
1.
- policyholder is a corp. beneficiary is an employee and the payor is the corp.
- Premiums are deductible
- benefits are non taxable
2.
- Policyholder is an employee, beneficiary is an employee and payor is an employee
- premiums are not deductible
- benefits are non-taxable
Special case
- individual policy, holder is a corp. beneficiary is a corp. payor is a corp.
Special case
most people would think that a corporation being the beneficiary has a CDA (Capital dividends account), can include benefits from a critical illness into the account.
Critical illness is not a life insurance and therefore do not factor into the corporation's capital dividend account.