Is Life Insurance Tax Deductible?
I enjoy legally not paying taxes (key word here is legally).
I also enjoy putting money in my Sacred Account (high-early-cash-value-dividend-paying-whole-life-insurance…and yes that’s a mouthful which is one reason I just call it the Sacred Account)!
So the question came up for me, can I deduct the money I put into my life insurance on my taxes?
In a nutshell, no.
But I’ll explain why, what tax benefits I get instead, and how I do lower my taxable income!
Life insurance allows for tax free loans, which means I can borrow against my cash value and the loan I receive isn’t taxed.
Additionally, if I use these loans for investing or business purposes, I can deduct the interest off on my taxes too!
Life insurance also pays out a tax free death benefit, so that when I die, my beneficiaries receive money tax free from my policy.
I’m already getting these tax benefits, so the IRS is not going to give me a tax deduction on top of that.
I can put money into certain retirement accounts or trusts, which do offer a tax deduction, and then put money into life insurance…but that isn’t “life insurance” being “tax deductible”, that is the retirement plan or trust being tax deductible and me using that to buy life insurance. Big difference.
For me, the life insurance works as an alternative to a savings account that I can take loans again tax free, and my money still grows even when I’m using it!
I lower my taxes in other ways!
The reality is the tax code itself is over 6,000 pages in length and only about .50% of it has to do with the paying of taxes.
The rest is ways to legally not pay taxes, incentives, credits to reduce taxes and the like.
So, I hire a team to help me reduce my taxes through these means!
The beauty is, I can still use life insurance to do this.
Let’s say that I want to fund an oil and gas investment that gives me a 95% tax deduction on the principal value of my investment.
In this example, if I invest $100,000, I get to deduct $95,000 of it from my taxes that year.
That’s a great tax deduction!
Now, if I put the money into my life insurance first, the $100,000 grows at 3–5% per year on average, tax free for the rest of my life, and also, I can borrow it out and put it in the oil and gas investment.
This means my $100,000 is growing in my life insurance, plus it is lowering my taxes at the same time, and I may make money on the oil and gas investment too (I say may because I’ve also seen people not make money in oil and gas and no investment is guaranteed).
I could do the same thing where I fund my life insurance policy with $19,500 and then borrow it out and put it in a Self-Directed 401k plan and get tax savings there too while my $19,500 still grows!
The reality is there are lots of strategies like this where taxes can be lowered, and life insurance can be used!
To learn more about these kinds of strategies, I want to offer you a free copy of my book The Blueprint to Financial Freedom by clicking here!
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To Purpose, Wealth & Freedom,
Jerry Fetta
Jerry Fetta is the CEO and Founder of Wealth DynamX. He is a nationally recognized financial expert featured in Forbes, Yahoo Finance, Fox, Chicago Weekly News, New York Finance, interviewed on over 45 podcasts with world renowned experts, earning endorsements and affiliations throughout his career with names like Kevin O’Leary, Grant Cardone, Dave Ramsey, and Pamela Yellen.
Jerry’s mission in life is to help create millions of financially educated and solvent families achieving greater financial freedom and sharing the truth about money with those around them.
Learn more at www.WealthDynamX.com
(DISCLAIMER: The information in this content should not be considered tax, financial, investment, or any kind of professional advice. Only a professional diagnosis of your specific situation can determine which strategies are appropriate for your needs. Wealth DynamX can and does not provide advice unless/until engaged by you.)
