Mortgage insurance on mortgage

Tax Topics
1

Good afternoon
I have a client running a business from home and is earning a 100% commission. I am aware that she could claim house insurance based on the percentage of home/work usage. She also paid $1,390 Mortgage insurance on the mortgage. Is this something she could claim? In my opinion, the answer is no, but I just want to check with the expertise. Thanks

2

A commissioned employee??

I don’t see those in Section 8 of the Income Tax Act…
(S 8 (1) (f))

3

She works from home and have T2200 form -section 10 (Did this employee’s contract of employment require him to use portion of his home for work?) Yes 100%

4

I believe that CRA position still is that they do not believe that Mortgage interest (and by extension, mortgage insurance) falls under (S 8 (1) (f)) for commissioned salespersons.

CRA have previously indicated that their view is that (S 8 (1) (f)) is permissive of a reasonable proportion of property taxes and insurance.
(And a “reasonable proportion” is almost always a LOT less than the taxpayer first imagines, after reducing for not only area, but time-use apportionment business/personal as well…)

However, ALL of the conditions of S8(1)(f) must be met, so the signed T2200 needs to cover all of those.

5

Hi Joe.
All conditions of S8.1.f are met for this client.
I know the insurance will be proportioned but I am not sure about MORTGAGE insurance on mortgage. I believe this is something optional for the property owner to have insurance on the mortgage. The client work from home full time. Thanks for you help.

6

In my opinion, house insurance is to protect the property (house), she is using part of it for business purpose. She can claim the proportional part of it.Mortgage Insurance has nothing to do with her business, it is for the protection of the mortgage. She can claim the interest paid on mortgage proportionally same as house insurance but not mortgage insurance.

7

What type of insurance are you talking about? Life or disability insurance or mortgage default insurance (commonly known as CMHC insurance)? ***** EDIT**** It looks like you are talking about life and/or disability insurance premiums.

Life and disability insurance on a mortgage is not deductible unless required by the lending institution. I suppose that makes sense, because if the borrower dies the insurance proceeds used to pay out the mortgage are tax free.

CMHC insurance or mortgage default insurance is never deductible but gets added to the cost of the asset. Interesting enough, mortgage default insurance is one of the only types of insurance where the beneficiary of the policy (the bank) swindles someone else (ie the borrower) into paying the premiums on behalf of the lender.

8

I thought so the same. Thanks.

9

I agree with your second paragraph. I think Mortgage Insurance is to protect the person in case of illness or death so has nothing to do with the business from home.

10

Thank you all for your reply.

11

As I noted above, she cannot claim any part of the mortgage interest either.

12

No I am not claiming that. Thanks Joe

13

For work space in the home expenses under commission employee, you can deduct the part of your costs that relates to your work space, such as the cost of electricity, heating, maintenance, property taxes, and home insurance. However, you cannot deduct mortgage interest or capital cost allowance.

You can find more detail from the link below:

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-229-other-employment-expenses/commission-employees/work-space-home-expenses.html