What Taxes Do You Pay On Life Insurance?

  1. 63333 POINTS
    Peggy Mace
    Most of the U.S.
    Life insurance is generally exempt from state and federal income tax. If the life insurance plus other assets add up to over the amount exempt from estate taxes, that portion will be subject to federal estate taxes. State inheritance taxes might also apply. If the benefit is paid in installments, the death benefit is not taxed, but insurance earned on the death benefit will be.
    Answered on July 26, 2013
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