Tax Savings And Tax Benefits With Life Insurance

We all work very hard in our lives to attain the perfect life. A dream house, a car, latest clothes, gadgets and so much more along with bills to pay and monthly expenses to be met are very important facets of everybody’s lives. With ambitions and dreams making us work harder day in and day out, sometimes the only thing we don’t realize to achieve our dreams is that beyond earning a good pay package, we can all save more money to realize our dreams through tax saving plans.

To avail it benefits and in order to help save more of your monthly salary, it planning is extremely crucial. To plan your it savings, a key factor in your it saving plan is the income earned by the individual per annum as well as the income it laws governing the country. With the it rates differing from bracket to bracket, the total it an individual needs to pay depends on his annual income, but there are many ways to save your tax money.

To save tax and to maximize earnings, an individual needs to invest his income wisely across various it saving schemes. The smartest way to maximize your tax benefits is by investing them wisely into diverse tax saving investment plans. Other good investment options include, Investing in a pension plan for retirement which is a very good option since it contributes to your family’s future as well. Thus, planning your tax saving options in advance helps you take full advantage of the various it saving plans available to get maximum it benefits. Granted by the government, it deductions help save the it on premium paid as well as helping us earn a tax free maturity as well.

Apart from all the above mentioned options, an individual can also invest in Life insurance instruments which help us save more it. Investing in tax-saving instruments should also be a well-thought out and planned exercise, rather than just a one-off investment without calculating the consequences.

A good life insurance policy is also a good it saving plan since under the Income Tax Act 1961. By investing in a life insurance plan, an individual is allowed to write off the premiums that one has to pay while calculating his taxable income (subject to conditions of Income Tax Act 1961).

When subscribed, an individual gets tax benefits on the premium paid and tax benefits received under the policy as per the prevailing Income it laws. Exempted from tax under Section 80 C, the premium paid under this life insurance policy along with the maturity proceeds are exempted from it under Section 10 (10D). Thus investing in a life insurance policy helps save more tax as well as helps accumulate a lot of income it savings on your taxable income.

The key to tax saving ultimately lies in starting out early in investing in a suitable it saving option which earns great returns as per your ambitions, dreams and plans of life.


The Tax Benefits You Can Reap From Long Term Care Insurance

The sale of long-term care policies in the past years lowered due to the wobbling economy and the staggering costs of LTC throughout the country. Many individuals are scared of investing on long-term care insurance, they believe that their lifetime savings are put to risk and there’s no sense to buying LTCi policies. Otherwise, this misconception that LTC insurance will just drain a person’s assets should be erased on everyone’s minds; long-term care insurance is a preparation not a risky investment.

The federal government admitted that it can’t pay the bill for long term care of all Americans. However, the government provides tax incentives to encourage Americans shoulder their own long-term care needs and promote affordable LTC insurance.

Individual Purchase

Tax-qualified LTCi premiums are treated as medical expenses. If you itemize the tax deductions. the medical expenses can be deducted up to 7.5 percent of your Adjusted Gross Income (AGI). However, the LTCi premium considered as a medical expense is recognized only by the qualified LTCi premiums based on the age and health condition, as set forth under the Internal Revenue Code 213(d). The amount that exceeds the eligible LTCi premium is not counted as medical expense.

Self-Employed

Self-employed individuals can cut down 100% of their LTCi insurance premiums at the amount allowed by the eligible premium. The excess from Eligible Premium is non-deductible for a medical expense. It is not required to attain 7.5 percent Adjusted Gross Income threshold to qualify for this kind of deduction.

The deductible premiums may also apply to premiums paid for spouse and dependents of the self-employed individual. Nevertheless, a self-employed individual is not allowed to deduct LTCi premiums when he/she or his/her dependent is eligible for subsidized LTCi plan, wherein the employer pays all or a portion of the premiums for LTCi.

Employer’s Contribution

An employer paying for the entire or a part of LTCi premiums on behalf on an employee may get a deductible as a business expense. Unlike the individual premiums, the deduction for this type does not depend on age limits. Also, the employer’s contribution is not counted to the employee’s AGI.

A portion of the premium paid by an employer can be applied as balance that an employer can pay for his or her medical expenses. This can go up to the eligible premium amount and will be then used as deduction for medical expenses that exceed 7.5 percent of AGI.

LLC and Subchapter S Corporation

The tax for the members of an LLC are considered as partnership, while shareholders or employees of Subcharter S Corporation, with 2% share of the corporation, are qualified as self-employed individuals.

The partners, members, shareholders or employees incorporate the LTCi premium in their Adjusted Gross Income (AGI), but they may reduce up to $100 percent of the age caps for the eligible premium.

If a shareholder/employee purchases LTCi under his or her name and not the S Corporation, the S Corporation will not be considered as partnership and the shareholder is no longer considered a partner as well. Also, the shareholder is not considered as self-employed and is only allowed to use the eligible LTCi premiums in the itemized deductions, which are subject to the 7.5 percent AGI threshold.