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	<title>New answer on: Does life insurance get taxed?</title>

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		<title>By: Michael Richardson</title>

		<link>https://insurancelibrary.com/life-insurance/does-life-insurance-get-taxed</link>

		<dc:creator>Michael Richardson</dc:creator>

		<pubDate>Fri, 22 Mar 2019 21:08:31 +0000</pubDate>

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		<description><![CDATA[Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren&#039;t includable in gross income and you do not have to report them. However, any interest you receive is taxable and you should report it as interest received.
If the policy was transferred to you  for cash or other valuable consideration, the exclusion for the proceeds is limited to some of the considerations you paid,, additional premiums you paid, and certain other amount.]]></description>

		

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		<title>By: Scott W Johnson</title>

		<link>https://insurancelibrary.com/life-insurance/does-life-insurance-get-taxed</link>

		<dc:creator>Scott W Johnson</dc:creator>

		<pubDate>Tue, 11 Apr 2017 16:35:38 +0000</pubDate>

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		<description><![CDATA[Thanks for the question.

It depends on numerous things such as the the type of policy, how the money is accessed, who access it.   It also depends on which tax you are referring to.  Most insurance agents on here are discussing federal taxes and those can be the most onerous.  However each state has their own rules and recommendations concerning this.]]></description>

		

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		<title>By: Michael Jarrell</title>

		<link>https://insurancelibrary.com/life-insurance/does-life-insurance-get-taxed</link>

		<dc:creator>Michael Jarrell</dc:creator>

		<pubDate>Mon, 20 Mar 2017 20:37:30 +0000</pubDate>

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		<description><![CDATA[The cash value portion of whole life insurance grows tax deferred. Your cumulative premium amount, or the total amount of money you have paid towards your policy will always be tax free if distributed by either taking out a loan against your policy, or surrendering your policy for the cash value. Since the growth of your cash value is tax deferred, anything beyond your total premium amount is subject to income tax. The death benefit is tax free.]]></description>

		

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		<title>By: Ronald Hinch</title>

		<link>https://insurancelibrary.com/life-insurance/does-life-insurance-get-taxed</link>

		<dc:creator>Ronald Hinch</dc:creator>

		<pubDate>Sat, 30 Jan 2016 14:09:42 +0000</pubDate>

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		<description><![CDATA[The death benefit of a life insurance policy passes to the beneficiary tax free.  However, in the case of a cash value policy there may be tax due on the money that has grown more than the premium paid.  Of course, in most life contracts the beneficiaries do not get the cash values upon death of the insured as they go back to the company upon death.  This makes whole life insurance a very bad investment and guarantees the insured to be underinsured.  Life insurance should always be separated from money invested by purchasing level term life insurance and investing the difference.  If you have a whole life policy and change to a cheaper term policy the cash values doesn&#039;t have to be lost as they can be transferred into a growth vehicle such as an annuity where it will grow tax-free and probate-free.]]></description>

		

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		<title>By: Tim Wilhoit</title>

		<link>https://insurancelibrary.com/life-insurance/does-life-insurance-get-taxed</link>

		<dc:creator>Tim Wilhoit</dc:creator>

		<pubDate>Tue, 10 Nov 2015 14:28:20 +0000</pubDate>

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		<description><![CDATA[Life insurance can be taxed in certain circumstances. Here are some of the reasons that it can and cannot be taxed.

Life insurance can be taxed if you cancel a cash value policy, such as a whole life or universal life where cash value builds. When you surrender or cancel a policy all of the growth of the cash value is taxed as ordinary income. If you apply for a loan to borrow against your cash value and keep it in force, then that money is not taxed.

Life insurance death benefits are usually not taxed regardless of whether the policy is cash value or term. Life benefit proceeds are passed directly to the beneficiary tax free and do not go through probate. However, in most cases if the beneficiary is left to the estate and the life proceeds go into probate, then the proceeds can be taxed as part of the estate.

Both of these mistakes can be avoided with good planning before it is too late.]]></description>

		

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		<title>By: John Cornwell</title>

		<link>https://insurancelibrary.com/life-insurance/does-life-insurance-get-taxed</link>

		<dc:creator>John Cornwell</dc:creator>

		<pubDate>Fri, 06 Nov 2015 22:14:17 +0000</pubDate>

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		<description><![CDATA[Simple but short.....normally no.....it is rarely touched by anyone. There are some states with new laws in the making that may change this.....and that is on a case by case basis.....but it will probably take years to shake the insurance company giants to agree to this......and only if it is the federal government.]]></description>

		

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		<title>By: Terry A. McCarthy, CLU, ChFC</title>

		<link>https://insurancelibrary.com/life-insurance/does-life-insurance-get-taxed</link>

		<dc:creator>Terry A. McCarthy, CLU, ChFC</dc:creator>

		<pubDate>Mon, 06 Jul 2015 17:48:17 +0000</pubDate>

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		<description><![CDATA[Broad questions deserve broad answers and so the question as to taxation of life insurance benefits is this: Generally, life insurance benefits are paid free of income taxation when paid to individuals. But, there are exceptions and possible complications to this simple answer. One big potential problem is when the decedent is also the policy owner and the life insurance gets added to the value of an estate and then taxed in that way.  The IRS looks for incidents of ownership up three years prior to the death.  Also, life insurance paid to an estate that is subject to other forms of taxation may result in the life benefits being taxed as well so it isn&#039;t always a good idea to pay life benefits to an estate. Also, life insurance after the first $50,000 is taxed when premium was paid by the employer.  Life insurance you buy separately under group options are generally not taxed as income (provided all the rules are followed - see above).  Also, generally when a corporation pays the premium and the benefits are payable to the corporation, they can&#039;t write off the premium and collect the benefit free of income taxation. Under current law life insurance proceeds are only excludable up to the amounts of premium paid by the corpo in following with laws placed on the books in 2006. There is a whole host of rules that must be followed to avoid taxation but it is possible that life insurance can be paid to a corporation and avoid taxation. While most of us will not be subject to taxation on the life insurance benefit it pays to understand how these benefits become taxable. Then, it is reasonably easy to avoid these pitfalls. Don&#039;t also overlook the advice of a good agent and avoid the use of life insurance trusts to make sure the money moves to the beneficiary without taxation to the largest extent possible.]]></description>

		

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		<title>By: Stan Cox II</title>

		<link>https://insurancelibrary.com/life-insurance/does-life-insurance-get-taxed</link>

		<dc:creator>Stan Cox II</dc:creator>

		<pubDate>Mon, 04 May 2015 20:27:31 +0000</pubDate>

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		<description><![CDATA[One of the benefits of life insurance is the protected status it receives with regard to taxes. The death benefit paid to a beneficiary is income tax free. That is there is no income tax assessed on the benefit payment to the beneficiary. With permanent life insurances including Whole Life, Universal Life and others that accrue Cash Value, the cash value growth is also tax free.]]></description>

		

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		<title>By: Marcy Tooker</title>

		<link>https://insurancelibrary.com/life-insurance/does-life-insurance-get-taxed</link>

		<dc:creator>Marcy Tooker</dc:creator>

		<pubDate>Sat, 11 Apr 2015 23:46:49 +0000</pubDate>

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		<description><![CDATA[Generally, no, but more information needs to be provided to give a more accurate answer. If you receive the proceeds as the beneficiary because of a death of an insured person, the benefits are almost never not included in your taxable income. However, if you receive interest then it has to be reported just like any other interest earned. As and additional note, the death benefit is usually included in calculation the estate taxes of the person who passed away.]]></description>

		

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		<title>By: David G. Pipes, CLU®, RICP®</title>

		<link>https://insurancelibrary.com/life-insurance/does-life-insurance-get-taxed</link>

		<dc:creator>David G. Pipes, CLU®, RICP®</dc:creator>

		<pubDate>Fri, 27 Feb 2015 17:21:25 +0000</pubDate>

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		<description><![CDATA[There are several federal tax benefits to owning life insurance.  The most obvious is that the death benefit passes to the policy beneficiary income tax free.  This doesn’t just apply to individuals but can apply to a business, a trust, or an estate as well.   When the insurance is owned by a third party or an irrevocable trust it will may also bypass estate taxes.

When an owner needs to withdraw money from a policy by surrendering the policy the money that is withdrawn receives favorable tax treatment and only that portion that is in excess to the premiums paid becomes taxable.

You can take out federal income tax-free loans from a permanent life insurance policy.  The loans may reduce the death benefit and are limited by the cash value of the policy.  When loans are taken the proceeds are not subject to the 3.8% passive income tax rule of the Affordable Care Act (ACA)  These loans will not affect income taxes on your social security benefits and they do not affect the FAFSA application for student funding.

Increasingly policies have provisions that allow the owner to withdraw funds to pay for certain long term care expenses.  This is usually free of federal income tax.  Discuss this more closely with your insurance agent as different company designs will result in varying taxation.

There are tax free transfers available to holders of permanent insurance policies that allow growth in excess of premiums paid to be transferred to other insurance and annuity contracts without incurring a current tax obligation.  Of course, death eliminates all taxes on deferred growth.]]></description>

		

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