President, Lane Independent Agency, Southern California
The Great News is that Life Insurance Beneficiaries do NOT have to pay taxes on payments to them. Employees who receive Life Insurance provided by an employer are, however, receiving a benefit paid by that employer. You are liable for the taxes for the value of that benefit. Be happy though, that the payment on that policy will be absolutely tax free to the beneficiary. Gary Lane, Registered Representative, New York Life, 949 797 2424. Thank you.
If you are referring to group life insurance, the first $50,000 is usually not considered a taxable employee benefit. Coverage beyond $50,000 is taxable to the employee for the same reason most things have taxes: the government needs money.
If you are referring to the benefit that is paid to a beneficiary upon the death of someone with life insurance, that benefit is not charged income tax.
Your question could go a couple of different ways. A personally owned life insurance policy is NOT taxed. The cash value can be borrowed to avoid taxation. The death benefit proceeds when paid to the beneficiary is NOT taxed either.
If you are asking about taxing a life insurance benefit such as group life insurance, Peggy is correct. The face amounts under $50,000 are not taxed, however, amounts exceeding $50,000 or a certain percentage of your income can be considered taxed employee benefits.
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If you are referring to the benefit that is paid to a beneficiary upon the death of someone with life insurance, that benefit is not charged income tax.
If you are asking about taxing a life insurance benefit such as group life insurance, Peggy is correct. The face amounts under $50,000 are not taxed, however, amounts exceeding $50,000 or a certain percentage of your income can be considered taxed employee benefits.