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Have you taken out life insurance from your bank? With 62% of households owning one, this financial investment is the favorite of the French according to INSEE. Its advantages are often unrecognized and it is not your banker who will disclose them to you. To keep its tax advantages, a word of advice: do not terminate it!

Life insurance is the most attractive financial investment from a tax standpoint. At the end of 8 years of detention, the tax advantages are maximum. In order to save on your taxes, it is better not to close your contract when you withdraw money from it.

Thanks to Tax Priority, my Tax Decreases

Each sum deposited during the life of the contract is Effective Date that of the subscription. This is called fiscal anticipation.

Once the life insurance is 8 years old, all monies paid, when withdrawn, will benefit from the optimal taxation of 0 to 7.5% depending on the level of capital gains (not counting social security contributions).

If a few years later we receive a amount of money we want to place (bonus, inheritance ...) while waiting to use it (to buy a house for example), everything by wanting to make it grow, we will regret having closed his plan! Indeed, opening a new contract starts from scratch.

So, in case of withdrawal, it is better to leave the minimum required by your insurer, in order to keep your contract open and to be able to benefit from its favorable taxation in the future. If you withdraw beyond the minimum required, your life insurance will be terminated and you will lose the tax benefits you had acquired!

You think you are beneficiary of a life insurance, discover our tip to recover the sums because the transfer is not automatic

The Double Taxation of Life Insurance

Although the taxation of life insurance is interesting, it is complex. Indeed, the earnings of life insurance are doubly taxed.

1- Social security contributions

Social security contributions (CSG-CRDS ...) amount to 15.5% of earnings. They are withheld at source each year for so-called “euro funds” or “guaranteed funds”, and during withdrawals for listed media, UCITS.

Their amount does not vary according to the number of years of detention, so we will leave them aside for this time.

On the other hand, capital gains, in the event of partial or complete withdrawal, are subject to a tax whose rate is declining and becomes optimal after 8 years.

2- The Capital Gains Tax, Degressive and Optimal from 8 years old

In case of withdrawal on his life insurance, we are taxed on the gains or capital gains. The rate of this tax decreases over the years. You can pay this tax in 2 different ways, depending on your tax situation:

- the reintegration of capital gains into income when declaring income tax, where they will therefore be subject to the income tax scale.

- the withholding tax, also known as withholding, directly taken at the time of withdrawal (also called redemption).

The rate varies as follows over the years:

35% 15% from 0 to 7.5% *-------|--------------------------------|--------------------------------|---------------------|-------------->

1st year 4th year 8th year Xth year

* the tax is 0% up to € 4,600 in capital gains for a single person, up to € 9,200 in capital gains for a couple married. Beyond that, the tax rate is 7.5 %.

Concretely, if I use my life insurance after 8 years, the taxation will be as interesting as possible. And, this is not negligible, regardless of the date on which I paid my money on my contract (Xth year on the diagram), I keep its tax precedence.

Taxation likely to evolve with the law

The taxation of life insurance may be reviewed each year as part of the vote on the finance law by Parliament, these data are subject to change.

The Berger Lefebvre parliamentary report has just been issued on this subject, it is not planned for the moment to touch the rule of tax anticipation, but it is planned to increase the minimum holding period of 8 years and to propose a new type of contract.

If this is the case, banks and insurers will take the opportunity to encourage customers to close old plans, hence the interest in knowing this tip!

Savings Realized

The performance of a contract and the taxation of a buyback are data that vary from one contract to another, calculating them precisely requires knowledge that I do not have.

Roughly speaking, on € 1,000 in capital gains:

- a 7.5% tax = 75 € (to which are added the social security contributions of 15.5%)

- a tax of 35% = 350 € (to which are added social security contributions of 15.5%).

The savings achieved will be € 275, or even € 350 if you are below the threshold.

And you, do you have life insurance? Did your banker already explain to you the advantage of not closing your life insurance? Testify in the comments.

Figures taken from the INSEE study to be discovered here.

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3 Tips for Paying Less for Your Insurance.

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