Every Canadian driver pays sales tax on their car insurance premiums, but the amount varies dramatically by province.
Do You Pay Tax on Car Insurance in Canada?
Yes — sales tax applies to car insurance premiums in all Canadian provinces and territories. The specific tax and rate depends on your province:
- HST provinces (Ontario, New Brunswick, Nova Scotia, PEI, Newfoundland): Full HST rate applied to insurance premiums
- GST + PST provinces (BC, Saskatchewan, Manitoba): Both federal GST and provincial PST apply to insurance
- Quebec: GST + QST applied at separate rates
- Alberta, NWT, Nunavut, Yukon: Only federal GST (5%) applies
Car Insurance Tax by Province — 2026
Sales Tax on Car Insurance — All Provinces 2026
| Province | Tax Rate on Insurance | On $2,000 Premium | Tax Type |
|---|---|---|---|
| Alberta | 5% GST | $100 | Federal only |
| Yukon, NWT, Nunavut | 5% GST | $100 | Federal only |
| Ontario | 13% HST | $260 | Harmonized |
| New Brunswick | 15% HST | $300 | Harmonized |
| Nova Scotia | 15% HST | $300 | Harmonized |
| PEI | 15% GST+PST | $300 | Separate |
| Newfoundland | 15% HST | $300 | Harmonized |
| British Columbia | 12% GST+PST | $240 | Separate |
| Saskatchewan | 11% GST+PST | $220 | Separate |
| Manitoba | 12% GST+PST | $240 | Separate |
| Quebec | 14.975% GST+QST | $299.50 | Separate |
Why Alberta Is Cheapest for Insurance Tax
Alberta charges only the federal 5% GST on insurance premiums — the same rate applied in all territories. This is because Alberta has no provincial sales tax, making it the most tax-efficient province for insurance purchases. The Alberta government deregulated auto insurance in 2021, which has also helped keep base premium costs lower than many other provinces despite the lack of a provincial tax.
Average Car Insurance Premiums by Province
While taxes are an important factor, the base premium cost varies even more dramatically by province. These differences dwarf the tax variations:
| Province | Avg. Annual Premium | With Tax (Est.) | Tax Portion | Rated By |
|---|---|---|---|---|
| Ontario | $1,800–$2,400 | $2,034–$2,712 | $234–$312 | Highest in Canada |
| BC (incl. MSP surcharge) | $1,400–$1,800 | $1,568–$2,016 | $168–$216 | High (public+private) |
| Alberta | $1,300–$1,800 | $1,365–$1,890 | $65–$90 | Moderate |
| Quebec | $700–$1,000 | $805–$1,150 | $105–$150 | Lowest — public insurer |
| Atlantic provinces | $900–$1,500 | $1,035–$1,725 | $135–$225 | Moderate |
Premium estimates as of April 2026 — actual premiums depend on individual risk factors. Quebec has a public auto insurer (SAAQ) which explains its lower premiums.
Can You Claim Car Insurance on Your Tax Return?
For personal-use vehicles, insurance premiums paid with after-tax dollars are not deductible on your personal tax return. However:
- Business use vehicles: If you use your vehicle more than 50% for business, the business-use portion of your insurance may be deductible
- GST/HST input tax credits: Businesses registered for GST/HST can claim Input Tax Credits (ITCs) for the GST/HST paid on business-use portions of insurance
- Employees: Generally cannot deduct personal insurance premiums unless provided by an employer under a taxable benefit
Quebec's Unique Insurance Structure
Quebec operates a bifurcated auto insurance system:
- SAAQ (Société de l'assurance automobile du Québec): Quebec's public automobile insurance plan covers bodily injury from accidents. This is a separate annual contribution (not a traditional insurance premium), typically $500–$700 per year, and is not subject to GST/QST
- Private insurance: For property damage, Quebec residents purchase private auto insurance, which is subject to GST+QST
This structure is why Quebec's overall auto insurance costs appear lower than Ontario's — a significant portion of the coverage is provided through the public SAAQ system rather than through private insurance premiums that attract QST.
Factors That Determine Your Car Insurance Premium
While taxes add a fixed percentage to your premium, the base premium is determined by personal and vehicle factors:
- Age and driving experience: Younger drivers typically pay higher premiums
- Location: Urban areas (Toronto, Vancouver) have higher premiums than rural areas
- Claims history: At-fault claims significantly increase premiums
- Vehicle type: Sports cars and luxury vehicles cost more to insure than sedans and hatchbacks
- Coverage level: Comprehensive coverage costs more than basic liability
- Deductible amount: Higher deductibles lower your premium but increase your out-of-pocket costs in a claim
Frequently Asked Questions
Is car insurance tax-deductible in Canada?
Generally no — personal car insurance premiums are not tax-deductible for individual Canadians. However, if you use your vehicle more than 50% for business and are self-employed, the business-use portion of your insurance premium may be deductible on your T2125 (Business Activities) form. Businesses can also claim Input Tax Credits for the GST/HST paid on business-use portions of insurance.
Why does Ontario have the highest insurance premiums?
Ontario's high auto insurance premiums are driven by several factors unique to the province: fraudulent claims, high collision rates, expensive medical care costs through the Statutory Accident Benefits Schedule (SABS), and a litigious culture. The provincial government has been working to reduce costs through regulatory reforms since 2013.
Do I pay QST on my SAAQ contribution in Quebec?
No — the SAAQ contribution is a government-mandated levy, not an insurance premium, and is exempt from QST. Only private auto insurance premiums (for property damage) are subject to GST+QST in Quebec.
How much can I save by living in a different province?
On insurance taxes alone: approximately $200–$200 per year difference between the cheapest (Alberta, 5% GST) and most expensive (Atlantic provinces, 15% HST) provinces. However, premium costs vary far more than taxes. Ontario's average premium ($1,800–$2,400) is substantially higher than Alberta's ($1,300–$1,800) — the annual premium difference ($500–$600) far exceeds the tax difference.
Are insurance broker fees also taxed?
Yes — if a broker charges a separate fee for their services, that fee may also be subject to GST/HST. However, many brokers are compensated through commissions paid by insurers and do not charge direct fees to clients.
Conclusion
Sales tax on car insurance in Canada ranges from 5% in Alberta and the territories to 15% in Atlantic Canada. While these percentages translate to $100–$300 in additional costs on a typical $2,000 annual premium, they are a small part of the total insurance cost picture. Base premiums vary far more dramatically between provinces — Ontario's average premium is roughly double Quebec's, making the premium difference far more significant than the tax variation.
For average insurance rates by province, consult Insurance Bureau of Canada.
Disclaimer: This article is for informational purposes only. Insurance premium rates and tax rules change. Verify current information with the Insurance Bureau of Canada and CRA.