Tax-Exempt corporate life insurance
Tax-Exempt Corporate Life Insurance
A concern that Canadian business owners have is the high passive investment tax rate. That means that if you have GICs, mutual funds, bonds or other investments in your corporation, the tax rate on that can be quite high. That means that business owners are constantly looking for ways to have the most tax-efficient investments within their corporations, whether it’s within a registered account, a dividend paying investment, or other tax-sheltered options.
One of the options that can be very valuable is a tax-exempt life insurance policy. Now, we won’t go into the specifics of what that entails in the scope of this blog, but the easiest way to think about it is that you have a life insurance component and you also have an investment component. Now, the investment component can grow on a tax-exempt basis, granted that it stays within certain margins.
This can be very valuable for a business owner, as tax rates for passive investments can be as high as 40-60%, depending on what type of investment you have and what province you are in. Therefore, if you have an investment with a 5% return within that tax-exempt life insurance policy, it could be worth as much as a mutual fund or another interest-bearing investment with a 10% return outside of a tax-exempt account or policy, which is a significantly higher return required to match the same bottom line after taxes.
Business Critical can work with you to ensure that your investments are producing the highest return possible, providing an assessment and recommendations for adjustments. If you want to learn more about how you can save thousands of dollars through a combination of investments and corporate insurance policies, schedule a call or email firstname.lastname@example.org.