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Is life insurance taxable by the state and federal gov? Do you have to pay taxes on it? |
Is life insurance taxable by the state and federal gov? Do you have to pay taxes on it? The death benefit is never taxable when it is paid to the beneficiary. But if there is no name beneficiary, the proceeds are paid to an estate. Anyone trying to claim this money will pay income taxes from this estate. If the life insurance policy builds cash value, then this part becomes a bit tricky. Lets say you wanted to surrender the life insurance policy to get the cash value. The insurance company will charge you a surrender charge. If the total premiums you paid over the life of the policy is greater than the value of the cash value, you do not owe any income taxes. If the total premiums are less than the value of the cash value, you will only pay income taxes on the difference (or the gains). If you taken a loan on the cash value, you better pay this off first before surrendering the policy. If you don't, you will pay income taxes on the loan. As you can see, any life insurance that builds cash value pretty much sucks. Source(s): Read this blog! http://finance1o1.blogspot.com I believe most life insurance payouts are tax exempt. omg, I hope not. Please don't give the government any ideas. No, proceeds from life insurance are not considered taxable income. However, there could possibly be estate tax implications. Find an expert to guide you through those situations. |
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