Investor · Indianapolis, IN · Member since 2018 · 86 posts · 84 votes
Greetings BP:
I'm looking for a tax expert that is extremely familiar with the tax implications of using the infinite banking concept (Nelson Nash). Specifically how to take a loan from a policy to loan to my LLC and then pay the loan back tax free.
Some specifics:
I took a $17,000 loan from my IBC policy. I then loaned that money to my LLC which is using it to rehab my rental property in Indianapolis. I'm considering creating a promissory note with terms and conditions for the LLC to pay me back using the cash flow from the property once it is rented.
My tax adviser has some concerns about that payback money becoming income and therefore offsetting the whole plan to contribute to my IBC policy tax free so that it can continue to grow tax free.
You shouldn't be using a policy loan to do this. Your LLC should get a line of credit from a bank with an assignment of collateral against the policy as your personal guarantee. You can get a LOC at Prime. This will make the interest tax deductible.
What you are doing is going to end up in a wash. Your loan to the LLC is an expense to the LLC but the interest you earn is income to you.
This is bad. You need to get that loan paid off and eat the tax loss. Do it right going forward and you'll see just how powerful this strategy is.
Thank you for your input. This completely makes sense. Only recently did I come to find out that loans could be taken against the policy as collateral. Now that I am where I'm at for now - I was planning to do the BRRR strategy and repay the loan entirely anyways. That new 30 year will be a better situation
Any additional advice how best to handle the funds paying the loan off to myself that will avoid any alarm bells? Should I just transfer a fixed amount out of business checking to my personal checking until the loan is paid?