Do I have to pay tax on a life insurance death
benefit?
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don't have to pay tax on a life insurance death benefit. If
a life insurance death benefit is paid to you in a lump sum or other than at regular
intervals, include it in your gross taxable income on your tax return only to the extent
it is more than the
amount of life insurance death benefit payable to you at the time of the insured person’s death. In other words, if
the life insurance death benefit is $50,000 and you receive $50,100 the $100.00 is taxable
interest and you should include it on your tax return. If
the life insurance death benefit paid to you is not greater than the amount
of the life insurance death benefit payable at death
then it is not taxable and you should not include it on your tax
return. In other words if the life insurance death benefit is $50,000 and you receive
$50,000 there is no taxable interest to include on your tax return.
If you receive a life insurance
death benefit in installments you can exclude a part of each life insurance
death benefit installment from your taxable income on your tax return. Divide the
life insurance death benefit of the policy by the number of
years payments are to be received. That's the amount that is tax free each
tax year.
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Related tax
information about a life insurance death benefit |
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Is interest on life insurance policies
taxable?
Are life insurance dividends taxable?
Income Related Questions and Answers |
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IRS publications about a life insurance death benefit:
For more information tax about a life insurance death
benefit received in installments refer to
IRS Publication 525, Taxable and
Nontaxable Income. Also see
IRS Publication
17, Your Federal Income Tax. |
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Ask Julian Block your IRS and tax questions! |
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If you can't find the answer to your IRS or tax question in our
web you can call former IRS Special Agent and one of the country's foremost tax attorneys, nationally syndicated columnist ("The Tax
Adviser") Julian Block. Julian is also the tax Editor of Mutual Funds Magazine, America's premier investment magazine. To
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here. |
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