Agent Owner, Gilmore Insurance Services, Marysville, Washington State
How much tax you pay on life insurance will vary from none to some depending on how you use it and what it does. Usually there is no income tax due on death proceeds. ON rare occasions, the benefit could be taxible, but in the vast majority of situations the death benefit will not be taxable.
As far as cash values go there are both taxable and non taxable ways to set up your cash values. You should talk these aspects over with the agent you are doing business with.
Life insurance is usually left to a beneficiary income tax free. There will be income tax charged on the interest paid if the death benefit is taken in installments. Estate taxes can apply if the amount of coverage pushes the estate above the exempted amount. This year the amount exempted from federal estate tax is $5,250,000.
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As far as cash values go there are both taxable and non taxable ways to set up your cash values. You should talk these aspects over with the agent you are doing business with.