In Canada, life insurance dividends are not taxed as paid up additions while they are attached to the policy. If they are dividends on deposit the interest on the dividends is taxable.
On surrender or withdrawal the dividends form part of the cash value and will be taxed on the gain.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
Great question! The IRS considers dividends paid to you to be an overpayment of premiums, and as such, aren't taxed. You paid taxes on the money for the premiums that you paid , so basically you were just "over paying". That said, there can be situations where you would have to pay taxes if you take out loans and your policy lapses, but as long as it stays within the policy, you are fine. need more detail? feel free to contact me, I'm happy to help. Thanks for asking!
Co-Founder, TermInsuranceBrokers.com, Goldenzweig Financial Group, Las Vegas, Nevada
Dividends in life insurance policies are, by definition, a return of your money and are therefore not taxed (the money you used to pay the premiums were already after-tax monies). The dividends can be used in several ways (the most common that carriers offer are reducing premiums, securing paid-up additions, or receiving the monies directly as payments).
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On surrender or withdrawal the dividends form part of the cash value and will be taxed on the gain.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.