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You can deduct commercial insurance premiums on the buildings, machinery and equipment you use in your business, and the CRA puts them on line 8690 of form T2125. Business insurance is usually one of the easier costs to account for. The tricky parts are the policies that aren’t deductible, the ones that belong on a different line, and what a deduction is really worth to you.
Which business insurance premiums can I deduct?
Start with what the policy protects. Cover on the shop, the tools, the stock or the office equipment you use to earn income goes on line 8690. That’s the CRA’s own wording, and it’s the plain case.
You can deduct commercial insurance premiums that you pay for insurance on any buildings, machinery, and equipment you use in your business.
Line 8690, Insurance, Canada Revenue Agency, canada.ca
Some policies need a second look. Vehicle insurance isn’t reported on 8690 at all. It goes with your motor vehicle expenses, where only the business share counts. If you work from home, the insurance on that space is handled as part of your business use of home expenses. And life insurance premiums are generally not deductible, with one narrow exception: a policy pledged as collateral for a business loan. The CRA sends readers to Interpretation Bulletin IT-309 for that case.
| Type of cover | Where the CRA says it goes |
|---|---|
| Commercial insurance on buildings, machinery, equipment | Line 8690, insurance |
| Vehicle insurance | Motor vehicle expenses |
| Insurance on a home workspace | Business use of home expenses |
| Life insurance | Generally not deductible, narrow collateral exception |
How the CRA treats other cover, such as liability, cyber or professional policies, wasn’t confirmed on a page that could be read for this article. They’re common, and they usually protect the business, but check the T4002 guide or ask your accountant before you rely on a claim.
How do I record the premium in my books?
Keep it boring. Pick one insurance account and post each payment there, then attach the policy and the invoice to the entry so that anyone who opens your file in three years can see what the money bought. If the bill covers more than one thing, say a van and a warehouse, split it so the vehicle part can move to the motor vehicle section.
Here’s how that looks. Tomás runs a small flooring business out of a rented unit in Winnipeg. His one policy bill is $3,600 for the year, and his broker’s breakdown shows $1,200 of it is for the van. He posts $2,400 to insurance and moves $1,200 to the vehicle section, where only the business share of it counts. Ten minutes of work, and nothing ends up on the wrong line.
What about a premium paid in advance that runs into next year? Some businesses spread it across the years it covers. The CRA page that was read doesn’t lay out the timing rule, so this page won’t guess. Look at your accounting method and at guide T4002, or ask whoever files your return.
What is the deduction worth?
A deduction isn’t a refund of the premium. It cuts the income you’re taxed on. Say you pay $3,600 a year, which is $300 a month. If your income sits where the marginal tax rate calculator shows 29.65% for Ontario (that’s the figure at $78,000), the premium lowers your income tax by about $1,067. You still pay the other $2,533 yourself.
For a corporation, the picture is different. The corporate tax calculator gives a combined small business rate of 11.696% for an Ontario company in 2026. On the same $3,600 that’s about $421 of tax saved. That rate is a blend, because Ontario changed its small business rate in July 2026, so treat it as an estimate only.
If you’re a sole proprietor, the self-employed tax calculator shows how expenses move your bill. It lowers income tax but doesn’t lower the CPP part, so the saving there will be a little smaller than the table suggests.
What mistakes come up with business insurance?
The common one is deducting a personal policy. Home, life and personal health cover don’t become business costs because you run a business. Another is losing the paperwork, which matters because the CRA says records should be kept for six years from the end of the last tax year they relate to.
A third is mixing up the premium with a claim payout. A payout isn’t a deduction, and how it’s taxed depends on what it replaces. That side wasn’t researched for this page, so speak to your accountant if you’ve had a claim.
Finally, don’t buy cover you don’t need for the tax break. Spending $1 to save about 30 cents is a loss. Check the price against your real risk, and use the profit margin calculator to see how the cost sits against what you earn.
What should you keep for tax time?
Three things per policy: the policy document or schedule showing what’s covered, the invoice or statement showing what you paid, and proof of payment. If your insurer bills monthly, a year-end summary from them saves you hunting through twelve bank entries. Put all of it in the same folder where the rest of that year’s records live.
What this page is based on
The deductible items come from the CRA‘s page on line 8690 of form T2125. The six year record rule comes from the CRA’s guide on keeping records. The marginal and corporate rates come from the calculators here, which use 2026 federal and Ontario data. No insurers or premiums were compared, so this page can’t say what a policy should cost.
Frequently asked questions
Is business insurance tax deductible in Canada?
Commercial insurance on buildings, machinery and equipment you use in your business is deductible, per the CRA's line 8690 page. Life insurance generally isn't.
Where does vehicle insurance go?
With your motor vehicle expenses, not on line 8690. Only the business share counts.
Can I deduct insurance on my home office?
The CRA treats it as part of business use of home expenses, so it follows those rules.
Is life insurance ever deductible?
The CRA says a portion can be, when the policy is collateral for a business loan. Bulletin IT-309 has the details.
How long should I keep the policy papers?
The CRA says six years from the end of the last tax year the records relate to.
- Self-employed taxes in Canada: income, CPP and GST
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