losses on a VUL

I have a Variable Universal Life policy that I no longer need. On top of that I really need the cash due to other problems in life. What I would like to know is can I write off losses from the drop in the cash account once I cash it in. These are not losses due to surrender penalties but losses in value due to the investment droping in value. Currently my cost basis is around $48,000, and my current value is $33,000. I have heard it is possible to do this with a Vairable Annuity, but nobody can tell me if it applies to a VUL as well. Can anyone shed some light on this?

Cbrandon,

I am sorry to hear of your other problems, these are difficult times for many of us.

You need to discuss this with your insurance agent. You did buy some insurance coverage, and you need to know what is that cost. The cost of the insurance would be deducted from your $48,000.

Discuss your thinking with your insurance agent to get a good picture of the amounts with which you are working.

Unless you were paying annual taxes on reinvested amounts, you will only be able to claim a loss as an itemized deduction on Schedule A, subject to 2% of your AGI.

If there are any gains, they will be reported to you and the IRS on a 1099-R. You will put this amount on your 1040 tax retrun lines 16a and 16b. The gains may be subject to a 10% early distribution penalty.