I've seen lots of good discussion about 401(k) / RRSP taxability, but here's a different case.
In the US, there are life insurance policies that let earnings grow tax deferred, such as variable life / universal life policies. The earnings are then taxed at withdrawal time (which may be years in the future).
Does Canada have the same policy, that there are no taxes owned until distributions? Thanks in advance.
Life insurance earnings taxed?
Moderator: Mark T Serbinski CA CPA
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"><i>Originally posted by dsze</i>
I've seen lots of good discussion about 401(k) / RRSP taxability, but here's a different case.
In the US, there are life insurance policies that let earnings grow tax deferred, such as variable life / universal life policies. The earnings are then taxed at withdrawal time (which may be years in the future).
Does Canada have the same policy, that there are no taxes owned until distributions? Thanks in advance.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
I would add that living in Canada and owning such a US life policy could make problems with CRA because I have read that Canada will only allow the tax-free accumulation of income in a Canadian exempt insurance policy. Canada will require a Canadian resident to annually report the growth of a foreign insurance policy under the foreign investment entity rules using the mark to market approach.
I have not encountered the opposite, i.e. living in the US with a Canadian exempt policy, but I would expect that the IRS might also take issue with the arrangement.
I've seen lots of good discussion about 401(k) / RRSP taxability, but here's a different case.
In the US, there are life insurance policies that let earnings grow tax deferred, such as variable life / universal life policies. The earnings are then taxed at withdrawal time (which may be years in the future).
Does Canada have the same policy, that there are no taxes owned until distributions? Thanks in advance.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
I would add that living in Canada and owning such a US life policy could make problems with CRA because I have read that Canada will only allow the tax-free accumulation of income in a Canadian exempt insurance policy. Canada will require a Canadian resident to annually report the growth of a foreign insurance policy under the foreign investment entity rules using the mark to market approach.
I have not encountered the opposite, i.e. living in the US with a Canadian exempt policy, but I would expect that the IRS might also take issue with the arrangement.
Hi, In Canada, if you have a variable life insurance policy, as we do, this is what we have been told: As long as premiums are paid by an individual (rather than a company, as in key-man insurance), you can roll the policy over into an annuity without being taxed on the growth portion all at once. This would seem a better idea for us as far as Canadian taxes are concerned.
Do you know if it would make a difference for U.S. taxes?
Thanks yet again,
Marge
Do you know if it would make a difference for U.S. taxes?
Thanks yet again,
Marge