There are many benefits, including tax advantages, to owning and investing in life insurance. For example, Life insurance can help cover estate taxes and settlement costs as well as provide liquid assets for your heirs and loved ones. Because your income needs will change over time, we recommend that periodically review and update our life insurance policies to ensure adequate coverage for:
- Life event Changes, such as Marriage, Divorce
or the Birth of a Child
- Inflation, Market Growth or Loss
- Business Costs
- Personal Expenses
- Investment Payments
Keep in mind that life insurance is just one tool that — with the proper planning — you can use to reduce your taxable estate. Otherwise a policy can increase an estate and the taxes of the policyholder who passed away.
More tax treats for vacation retreats:
As with your personal residence, you may generally fully deduct one vacation home’s (or second home’s) mortgage interest and property taxes. The interest deduction applies to the first $1 million in mortgage debt used for buying, building or improving one principal residence and one vacation abode, plus $100,000 home equity indebtedness.
To make the most of the deduction, designate the residence with the largest total mortgage interest and real estate tax deductions as your second home.
There are additional tax advantages if you rent out your vacation home, depending on the number of days you lease it. For instance, you may benefit from additional tax-free rental income or deductions for rental-related expenses, such as utilities and maintenance.
Paying for health insurance with retirement funds
Will you be taxed on qualified retirement plan distributions used for health insurance premiums? Yes, said the IRS in a recent ruling. In one instance, an employee used qualified retirement plan distributions to pay health insurance premiums. In another case, a worker used them to pay medical care expenses. So, though you can pay such expenses pre-tax from current wages, you cannot enjoy the same tax break when you pay them from retirement plan distributions.