The Powerful Advantage of Tax-Exempt Investing in your Holding Company

Just a quick recap from the last video. We discussed that investing within your Holding Company (Holdco) is subject to the highest corporate tax rates (50.17%), and to get this money out of your Holdco, you’re subject to a further 47.4% qualified dividend tax rate.

Today, we wanted to discuss an alternative way of getting money out of your Holdco.

Instead of traditional investing, you can use a tax-exempt life insurance investment.

Like the last video, we will transfer an after-corporate tax amount of $100k annually for ten years. Instead, we will purchase a tax-exempt life insurance investment where we are not subject to the tax grind.

In the last scenario, after 25 years, the $1 million invested at 6%/year to get the money into your hands personally would only total $951k.

Using the life insurance investment, you are not subject to the passive income tax rate because life insurance is tax-exempt. In getting the money out of your Holdco, you’re not subject to the 47.4% qualified dividend tax rate for the same reason.

Therefore, the original $1 million, after 25 years, can now be in your hands personally worth approximately $2.2 million versus $951k in the other scenario.

To achieve this same yield in the other scenario, you would need an average return of 14.7%!

The difference is the tax!

In our next video, we discuss what to do if your investments in Holdco have average returns of more than 20%.

Stay tuned.

Reproduced with permission by WealthInsurance.com

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Taxing Gains: The 25% Surge in Capital Gains Taxes

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What happens when you invest within your Holding Company?