tax-damaging life insurance
September 2, 2010 | 30,00 EUR | answered by Matthias Wander
I want to buy a condominium for 160,000. I plan to pay off a portion of it in 5 years and 10 months with my life insurance payout of 65,000. I intend to rent out the apartment until I move in myself. The bank now has concerns about tax damage.
My net income is 913.00 Euros. Can you roughly calculate the tax damage in Euros for me?
Thank you in advance!
Dear Seeker,
Thank you for your inquiry, which I would like to answer based on your information and in the context of your efforts as part of an initial consultation.
If a loan, with financing costs being advertising expenses or operating expenses, is secured by a life insurance policy, this constitutes a tax-detrimental use of the life insurance policy. As a result, the contributions to the insurance company are no longer deductible as special expenses and the surplus generated from the life insurance policy is fully taxable.
However, if the loan is used exclusively and directly for the acquisition or production costs of an asset, there is no tax-detrimental use of the life insurance policy.
In my opinion, there is no tax-detrimental use of the life insurance policy in your case, since the loan is exclusively used for the purchase of the condominium and in case of self-use, the financing costs are neither advertising expenses nor operating expenses.
I hope this gives you an initial overview.
Sincerely,
Wander
Tax consultant
