What are the tax advantages of using the Infinite Banking Concept?

The Infinite Banking Concept offers some tax advantages that simply cannot be found in other investment options.

Not only does the “everyday worker” saving for retirement get some advantages here, but those who use this concept for their personal business or real estate investing will also glean some additional tax advantages from using this strategy.

tax advantages

Tax-Free Growth

The primary benefit from Infinite Banking is its ability to produce competitive growth when compared to other investment options. However, what makes this growth so appealing is also its ability to grow tax-free.

Tax inside a whole life policy is not tax-deferred. It is pre-taxed dollars that we continue to grow without taxes.

We pay taxes on our money before we put it into our cash value life insurance policy. This way, we get taxes out of the way right up-front. And, if we do all this properly, we can eliminate taxes indefinitely.

Whole life insurance growth comes in the form of dividends. Dividends are tax-free. This is the first major tax advantage of Infinite Banking.

Tax-Free Transfer to Heirs

If we keep our policy in-force, which is our goal when starting a policy, our money will transfer income tax-free to our heirs, or beneficiaries, when we die in the form of death benefit. This is a non-income taxable event.

This is the second tax advantage of Infinite Banking. So, when we combined these two strategies, we can literally grow our money without taxes and transfer the money tax-free when we die.

This way, our policy remains tax-free forever.

Extra Advantages for Business

For those who own their own business or invest in Real Estate we can also find another tax advantage.

Like we talked about in the opportunity cost section, we take out policy loans and pay ourselves back in our life insurance policy.

For those using this money for business, we can actually write off the interest paid to our life insurance policy as a business expense.

This gives us yet another layer of tax advantages that we won’t find with any other strategy.