Life insurance: what do you have to declare to taxes?

Life insurance is one of the favorite investments of the French. On the other hand, its taxation is complex. Short summary to know when to declare your life insurance income.

The deadline for declaring your income is approaching. And you may be wondering how to declare your life insurance for taxes. Whether you have chosen to invest your capital in a guaranteed and safe medium such as funds in euros, or rather in a more risky medium such as units of account, the taxation of life insurance remains difficult to understand. In general, you will not have to pay taxes on your interest received for the year 2021. Except in the event of surrender (total or partial) of your contract, you have nothing to declare.

Indeed, as long as you do not make a withdrawal, you are exempt from notifying the taxes of the gains from your euro fund or your units of account.

What happens in case of withdrawal in 2021?

On the other hand, if during the past year, you have made a withdrawal from your life insurance, your earnings may be taxable. Indeed, the Public Treasury taxes the gains generated by life insurance at the exit, at the time of redemption.

To calculate the amount of tax due, the tax authorities will thus distinguish between deposits and capital gains. If you made a partial surrender, then you are taxed on the share of the capital gain included in the amount withdrawn, on a pro rata basis. For a total redemption, the tax will relate only to the capital gain, that is to say the difference between the total of the payments made since the opening of the contract, and its final value at the time of the total redemption. Obviously, if there was no capital gain, you will have no tax to pay.

Know that you benefit in all cases, at the time of withdrawal, from a reduction of 4,600 euros, 9,200 euros for a couple therefore, if your life insurance contract is more than 8 years old at the time of redemption. This allowance is valid each year. It concerns the share of winnings in your withdrawal. Note that it is the Public Treasury which applies the reduction itself on the basis of the elements communicated to it by your insurer. The latter has also had to send you a single tax form (IFU) where he details the amounts indicated to the tax authorities.

Note also that interest may be exempt from tax in the event of redemption, regardless of the length of the contract, in several specific situations: dismissal, recognition of a 2nd or 3rd category disability, or early retirement. These exceptions concern both the policyholder and the spouse or PACS partner.

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