Since the receiving the fresh proceeds from a personal bank loan commonly taxable, it’s perhaps not stunning that the fees of this financing isn’t nonexempt often. Repaying the primary from home financing doesn’t have tax consequences, settling the balance toward credit cards does not have any tax consequences, and paying an unsecured loan for which a life insurance coverage try guarantee will not end up in any tax consequences either.
However, the fresh new “no tax consequences” consequence of paying a life insurance policy mortgage will be inspired by the the way the loan are paid off. To the the total amount that it’s paid back having ‘outside’ bucks (not related into life insurance policy alone), the fresh new cost isn’t taxable just as the bill of the financing proceeds just weren’t taxable sometimes. In addition, when your cost of your own loan pertains to drawing funds from the fresh life insurance policy itself, the outcomes tends to be other. (more…)