Life insurance: don’t let your tax exemption slip away this year

The end of the year is approaching, and with it, the possibility of optimizing the taxation of your withdrawals from your life insurance. If you don’t use your tax relief before December 31, you lose a valuable benefit.

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Time is flying and the end of the year is fast approaching. Between the race for gifts and the race for tax exemption, you may need to dip into your life insurance. And even if this is not the case, know that it can be harmful not to do so. Indeed, if you have not yet made a withdrawal (or “redemption”) since January 1, you risk losing a particularly attractive tax reduction. First of all, it should be remembered that in life insurance, only the part corresponding to the gains (interest or capital gains) is taxable in the event of surrender, and not the part corresponding to your payments. Gold, “each time you make a redemption, you withdraw from the entire piggy bank, therefore each time part of your payments, and part of your winnings”recalls Thibaud Lecomte, co-founder of the epargnoo platform.

Up to 9,200 euros 100% tax-free withdrawal for a couple

As a bonus, on the part corresponding to earnings, life insurance contracts over 8 years old benefit from very advantageous taxation in the event of withdrawal. Each year, a single individual (single, widowed or divorced) has a deduction of 4,600 euros. In other words, it is completely exempt from income tax on its withdrawal, and this, up to 4,600 euros of added value. For a couple (married or in a civil partnership subject to joint taxation), this reduction is doubled, with the possibility of withdrawing up to 9,200 euros tax-free earnings.

This tax reduction is reconstituted each year on January 1st – with the possibility of benefiting from it at the end of the year, then at the start of the next – but it is impossible to accumulate it from one year to the next. In other words, if you do not use your allowance of 4,600 euros or 9,200 before December 31 of the current year, it will be lost. Also, if you are looking for cash between now and the end of the year, and without adding to your tax bill, surrendering all or part of your life insurance is ideal.