When does my life insurance pay in the IRPF and how does it do it?

Image result for insuranceWhen does my life insurance pay in the IRPF and how does it do it?

Although life insurance is a product through which we can use in order to save or invest, the most general coverage is to cover the death or disability of the insured.

If the death occurs, the income obtained must be taxed in the Inheritance Tax, which is transferred in each Autonomous Community. But if a disability occurs or in any case in which the policyholder who hires and pays the insurance premium (or the insured if the insurance is collective) coincides, and the beneficiary of the benefit has to do it for the Tax on the Income of the Physical Persons (IRPF). We explain the key points.

Life insurance and IRPF

In the first place, although we have indicated that disability, that is, when you receive this benefit as an insured to cover this situation, is one of the clearest assumptions in which you have to pay for personal income tax, it is not always the case. There is an exception, disability insurance whose beneficiary is the mortgagee.

It is a very common case for many mortgaged that at the time of contracting the mortgage loan of their home they were also forced to subscribe to life insurance, with disability coverage in most cases, in favor of the financial institution to cover the outstanding debt. The changes in the new Mortgage Law that will be approved in this year 2018 end with this obligation, the mortgagee being able to voluntarily subscribe this insurance if the entity offers some consideration or improvement in conditions such as the interest rate.

Beyond this exception, if the policyholder is going to receive the capital stipulated in the policy, he must declare it in the IRPF of the year in which he received this payment. For example, if you received it in 2017, in the income statement for that year that can be submitted from April 4 to July 2, 2018.

The calculation method is very simple, it will do so for the amount received by subtracting the premiums paid in that year.

For example, if you have received 60,000 euros and paid 300 euros of premium in that year, you will have to declare a profit of 60,000 euros – 300 euros = 59,700 euros.

This yield is considered as real estate capital so it will have to be taxed depending on its amount at different rates:

  • The first 6,000 euros at 19%
  • From 6,000.01 euros to 50,000 euros to 21%
  • From 50,000.01 euros and up to 23%