Investor · Little Rock, AR · Member since 2016 · 121 posts · 37 votes
This question is about Infinite Banking concept. For the tax experts here, when I take a policy loan on life insurance for private lending, how should I structure it to minimize taxes?
This question is about Infinite Banking concept. For the tax experts here, when I take a policy loan on life insurance for private lending, how should I structure it to minimize taxes?
Generally unless the policy is a MEC loans are not taxable.
a MEC is a Modified Endowment Contract and would mean that the cash put into the policy was too much too soon for the IRS’s liking. If you’re policy is a MEC you would have been notified.
This question is about Infinite Banking concept. For the tax experts here, when I take a policy loan on life insurance for private lending, how should I structure it to minimize taxes?
Generally unless the policy is a MEC loans are not taxable.
a MEC is a Modified Endowment Contract and would mean that the cash put into the policy was too much too soon for the IRS’s liking. If you’re policy is a MEC you would have been notified.
This question is about Infinite Banking concept. For the tax experts here, when I take a policy loan on life insurance for private lending, how should I structure it to minimize taxes?
Are you referring to the loan from the policy, or the loan to the investor? The loan from the policy is tax free unless you've MEC'd the policy.
I consulted with my CPA, who advised that the policy loan should be transferred to my LLC for private lending purposes. This approach allows me to deduct the interest paid on the policy loan from my taxes. However, I will still be required to pay income tax on the income generated from my private lending activities.