Manage Taxes on Insurance Deductibles

In this FAQ, we cover the following topics:

A) Deductible (Insurance)

1. Nature of the Deductible

2. Special Cases

Clarification on the Deductible

A) Deductible (Insurance)

The deductible is the amount specified in the contract that the client must pay in the event of a claim.

1. Nature of the Deductible

• The deductible is a method of payment / deductible
• A method of payment is never taxable in Quebec
• Therefore, the deductible is generally considered non-taxable

2. Special Cases

In Quebec:

• Individual: amount of the deductible (non-taxable)
• Business: deductible amount + taxes on the total invoice

In Ontario (According to Certain Insurance Practices):

• Individual: deductible + taxes (depending on the treatment applied by certain insurers)
• Business: deductible + taxes on the total invoice

Clarification on the Deductible

It is important to note that the tax treatment of the deductible depends on the insurer’s contract. In Quebec, insurers generally specify a deductible amount excluding taxes in their contracts. However, in other provinces, some insurers specify that the deductible is taxable, which means the customer will have to pay the deductible plus applicable taxes.

Regardless of the situation, the deductible must always be treated as a receipt (payment) and not as a sale. In practice, the customer pays their share (deductible plus taxes, if applicable), while the insurer covers the remainder of the invoice amount. It is therefore essential to properly configure this scenario in the system to accurately reflect the accounting and tax reality.

For more information on deposits, see the FAQ: Manage Taxes on Deposits.