Life · Chapter 6 · Taxation
Taxation of Policy Loans
Definition
Standard policy: loans are NOT taxable (they reduce equity; loan interest isn't deductible). MEC: loans/withdrawals are taxed interest-first (LIFO) to the extent cash value exceeds cost basis, plus a 10% penalty before 59½.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
Related terms