Life And Health Tax Considerations

Front 1

Whole Life – Premiums

Back 1

Not tax deductible

Front 2

Whole Life – Cash value exceeding premiums paid

Back 2

Taxable at surrender

Front 3

Whole Life – Policy loans & Lump sum death benefit

Back 3

Not income taxable

Front 4

Whole Life – Policy dividends

Back 4

Not taxable

Front 5

Whole Life – Dividend interest

Back 5

Taxable

Front 6

Traditional IRA grows tax deferred

Back 6

Roth IRA grows tax free (if account is open for at least 5 years)

Front 7

Traditional IRA contributions are tax deductible (meaning...made with “pre-tax dollars”)

Back 7

Roth IRA contributions are NOT tax deductible (meaning...made with “after-tax dollars”)

Front 8

Traditional IRA has a 10% penalty for early non-qualified distributions (some exceptions)

Back 8

Roth IRA – qualified distribution can NOT occur until account is open for 5 years and owner is 59.5 years. Distributions are NOT taxable.

Front 9

Traditional IRA – payouts MUST begin by 70.5 years

Back 9

Roth IRA – payouts do NOT have to begin by 70.5 years

Front 10

Traditional IRA can be converted to Roth IRA if...

Back 10

owner's adjusted gross less than $100K, paying tax on all deductible contributions and earnings.

Front 11

Life Insurance & Annuities – Premiums

Back 11

Not tax deductible (personal expense)

Front 12

Life Insurance & Annuities – Policy Loans & Death Benefit

Back 12

Not income taxable

Front 13

Life Insurance & Annuities – Dividends & Cash Value Increases

Back 13

Not taxable (return of unused premium...however, interest is taxable); Not taxable (as long as policy is in force)

Front 14

Life Insurance & Annuities – Cash Value Gains

Back 14

Taxed at surrender

Front 15

Life Insurance & Annuities – Accumulations

Back 15

Interest is taxable

Front 16

Life Insurance & Annuities – Surrenders

Back 16

Surrender value – past premium = amount taxable

Front 17

Life Insurance & Annuities – Partial Surrenders

Back 17

First In First Out (FIFO)

Front 18

Life Insurance & Annuities – Settlement Options

Back 18

Death benefit spread evenly over income period (averaged). Interest payments in excess of death benefit portion are taxable.

Front 19

Life Insurance & Annuities – Estate Tax

Back 19

If the insured owns the policy it will be included for estate tax purposes. If the policy is given away (possibly to a trust) and the insured dies within 3 years of the gift, the death benefit will be included.

Front 20

Life Insurance & Annuities – Modified Endowment Contract (MEC)

Back 20

If the premium exceeds the seven-pay test, the policy becomes a MEC. With a MEC surrenders come out on a Last In First Out (LIFO) basis and there is a 10% penalty for surrenders prior to age 59½. With LIFO, if there is more cash than basis, the first dollars out will be taxable until the non-taxable basis is reached.

Front 21

Health Insurance - Group Long-Term Care, Group Medical Supplement & Group Medical

Back 21

PREMIUMS - deductible for employer; BENEFITS - not taxable

Front 22

Health Insurance – Group Disability Income

Back 22

PREMIUMS - deductible for employer; BENEFITS - taxable

Front 23

Health Insurance – Health Savings Account

Back 23

PREMIUMS - deductible; BENEFITS - not taxable when used for medical expenses BUT taxable plus 10% penalty under 65, no penalty over 65 for non-medical use

Front 24

Health Insurance – Buy-Sell, Key Person, Individual Disability Income, Individual Long-Term Care, Individual Medicare Supplement & Individual Medical

Back 24

PREMIUMS - not deductible; BENEFITS - not taxable