VUL Taxes

[BryanMD]

As I understand it, if you exit out of a variable universal life policy with cash surrender value greater than the total premiums paid you will have to pay capital gains taxes. If you exit with a CSV less than your premiums, can that be considered a tax loss for tax purposes?

[jfoxcpacfp]

Sorry, but no.

[BryanMD]

Is the basis for the VUL all of the money put in to the VUL up until that point, or just the portion that was invested after fees and and the cost of actual insurance?

[jfoxcpacfp]

The cost basis is the total of the premiums you have paid for pure life insurance coverage (other kinds of insurance can be lumped into the premium) less any untaxed distributions paid out to you.

[The White Coat Investor]

You used to be able to claim that loss (it was a bit gray) but the law changed.Now you can't. You can exchange into a low cost VA and let it grow back to basis and then surrender the VA.