Life insurance policies are not taxable, but they are subject to a variety of other taxes.
If you have a life insurance policy that pays out in the event of your death, you can use it as an income tax deduction. You must carry the policy for at least five years before you can deduct the premiums from your taxable income.
You will also be able to claim a deduction for the annual premium for term insurance policies if you pay it during the year when it is due. This is because these policies do not have any cash value, so they have no accumulated income or loss.
Income from dividends and interest income from a life insurance policy is also not subject to federal income tax (nor state income tax). Life insurance companies may pass along some or all of their profits to shareholders as dividends; however, this is not taxable since it is considered simple interest and not capital gain.
If you have a life insurance policy that pays out in the event of your death, you can use it as an income tax deduction. You must carry the policy for at least five years before you can deduct the premiums from your taxable income.
You will also be able to claim a deduction for the annual premium for term insurance policies if you pay it during the year when it is due. This is because these policies do not have any cash value, so they have no accumulated income or loss.
Income from dividends and interest income from a life insurance policy is also not subject to federal income tax (nor state income tax). Life insurance companies may pass along some or all of their profits to shareholders as dividends; however, this is not taxable since it is considered simple interest and not capital gain.
