Tax Season 2022
Starting a new year often brings a fresh start and new perspectives when it comes to financial goals.

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While some may be eager to continue building their investment portfolio or venture to pursue new investments, there is one major financial obligation important to plan for: 2021 taxes. Last year when filing taxes, many clients were able to take advantage of 2020 stimulus payments and federal tax deadline extensions. So, for this year, it is crucial to have a plan in place that does not rely on these factors.

As financial professionals meet with clients to make a plan for 2022, one of the first items to cover should be how to pay 2021 taxes while still keeping investments in place. This can be achieved by accessing liquidity through the cash-value of an eligible whole life insurance policy with an Insurance-Backed Line of Credit (IBLOC)1,2 or from non-retirement investments through a Securities-Backed Line of Credit (SBLOC).2 Both options can provide financial professionals and their clients with the flexibility to pay taxes and meet other cash needs throughout the year without disrupting long-term financial goals.3

For 2021 tax season, here are federal income tax brackets and rates to be mindful of:4

Tax Rate Married Joint Return Single Individual Head of Household Married Separate Return

10%

$19,900 or less

$9,950 or less

$14,200 or less

$9,950 or less

12%

$19,901 - $81,050

$9,951 - $40,525

$14,201 - $54,200

$9,951 - $40,525

22%

$81,051 - $172,750

$40,526 - $86,375

$54,201 - $86,350

$40,526 - $86,375

24%

$172,751 - $329,850

$86,376 - $164,925

$86,351 - $164,900

$86,376 - $164,925

32%

$329,851 - $418,850

$164,926 - $209,425

$164,901 - $209,400

$164,926 - $209,425

35%

$418,851 - $628,300

$209,426 - $523,600

$209,401 - $523,600

$209,426 - $314,150

37%

$628,301 and above

$523,601 and above

$523,601 and above

$314,151 and above

Why pay taxes with a line of credit?

Though filing taxes is a yearly task, other financial goals and obligations often take priority throughout the rest of the year and it’s beneficial to have a plan in place to pay unavoidable tax bills. Through the use of a line of credit, clients can access the money necessary to get this expense paid on-time and avoid unnecessary penalties. By accessing credit through an IBLOC or SBLOC, clients use liquidity from the assets already available to them and can avoid high-interest payments from other lines of credit. Through its Institutional Banking business, The Bancorp offers flexible payment terms and historically low-interest rates, with 36-month fixed rates for both an IBLOC or SBLOC. With competitive rates available, clients can choose to use funds to pay the entirety of their tax bill and use extra cash to continue to fulfil other financial goals.

Both the SBLOC and IBLOC offer competitive interest rates and cost-efficiencies when compared to conventional loans, including no application fees, underwriting fees, appraisal fees, or penalty fees for early payoff.5 When determining if an IBLOC or SBLOC is right for you, there are a few differentiators to keep in mind:

IBLOC

SBLOC

Interest-only revolving credit line that lets borrower access up to 95% of the cash value of an eligible whole life insurance policy1

Interest-only revolving line of credit based on nonqualified assets in an investment account

Minimum Credit Line: $65,000

Minimum Credit Line: $100,000

Available to individuals and trusts

Available to individuals, trusts, and entities

No closing costs

No annual or monthly fees

 

No charge for the portion of line in use

How to get started?

At The Bancorp, our Institutional Banking team is backed by more than 20 years of providing banking solutions for financial professionals and non-bank institutions. Our team partners directly with financial professionals to understand the wealth management strategy of their clients and provides a high-level of support without fear of competition that can often come from other banks. Whether an IBLOC or SBLOC is the right fit for your client, we work to simplify the process with the help of TALEA®, our proprietary loan origination platform that enables speed and simplicity.6

When developing a plan to pay 2021 taxes, an IBLOC or SBLOC could provide financial professionals and their clients a method to pay their bill and other life expenses without disrupting portfolio assets or assets under management. Learn more about what we can offer by visiting The Bancorp Institutional Banking at https://institutionalbanking.thebancorp.com/.

1. Policy must be in effect for at least 12 months at the time of credit application. Line of credit is contingent on life insurance policy remaining in good standing. The insurance policy owner must be the borrower and borrower must maintain a primary residential address in the U.S. Insurance policy must be issued by one of the following approved insurance providers to be eligible as IBLOC collateral: Guardian, MassMutual, Northwestern Mutual, NY Life, John Hancock, Penn Mutual, and Ameritas Life Insurance Corp. Other terms apply, See application for details.
2. Subject to credit approval and underwriting.
3. An IBLOC or SBLOC offered through The Bancorp Bank (“Bank”) cannot be used for the purchase of securities or to pay off a margin loan that was used to purchase securities. Securities-based lending has special risks and may not be suitable for everyone. If the market value of the pledged collateral declines below required level, the client may be required to pay down the loan or line of credit or pledge additional eligible collateral in order to maintain it, or the Bank may require the sale of some or all of the client's pledged collateral. The sale of the client's pledged collateral may cause adverse tax consequences.
4. Internal Revenue Service. "Rev. Proc. 2020-45, https://www.irs.gov/pub/irs-drop/rp-20-45.pdf, Pages 5-7. Accessed Nov. 16, 2021.
5. The Bank does not charge an application fee. State, local, and/or third-party fees may apply in some states.
6. The Bank does not offer tax, legal, or investment advice. Clients should consult a tax advisor, lawyer, or financial professional, as necessary.

 

Opinions, findings, or perspectives contained in this blog are those of the authors.