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Taxes on a individual life insurance policy is generally not taxable in any manner. A main factors in deciding the taxabiity of this is who paid the premiums for the life insurance and whether or not it was deducted on a tax return. If the premium was paid through a group life plan where the employer paid the premiums entirely then it would be taxable. Most employee benefit plans are set up by professionals who are aware of such things and make sure that the small premiums for the life and disability insurance are paid by the employee with after tax money so that tax problems do not arise.
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Life insurance death benefits are paid out tax-free as long as your premiums were paid with after-tax money. If you have a cash value life insurance policy and surrender the p…olicy, you may be subject to a taxable gain if the total cash value exceeds the cost basis of the policy.
Answer One of the still remaining, best aspects of Life insurance, (the investment aspect of which has been generally agreed to be poor at best) is that the… insurance industry has gotten congress to retain that payouts of life insurance to a beneficiary are NOT TAXABLE. That is also why one should always have their insurance policy payable to a specific beneficiary...it passes very quickly, directly to them, out side of the estate and being outside the estate, is exempt from income estate/inheritance and transfer taxes. (If you make yourself or your estate the beneficiary, you would lose the last advantage,as it would become part of the estate). citations: Amounts received under a “life insurance contract” , that are paid by reason of the insured's death aren't included in the gross income of the recipient (i.e., beneficiary) ( Code Sec. 101(a) ) (unless the policy was transferred for value). The exclusion applies to lump sum payments made at the time of the insured's death, and to amounts paid later to the extent the payment doesn't exceed the amount payable at death. ( Reg § 1.101-1(a)(1)
There are conditions depending on how the premium was paid, but generally, no.
received life insurance from my deceased father and it wasn't probated but added to his probate estate for taxes and 9 years later they want me to pay all the taxes. is th…is correct
Life insurance death benefit proceeds are generally not subject to income taxation, provided they are paid in a lump sum; however, there a few exceptions to this rule. For mor…e information: See your tax preparer.
If you are the named beneficiary of your sisters life insurance policy then there is no tax. If her policy however paid into her estate and you inherited the funds, then… it would be taxable.
This depends on the state and its particular inheritance tax laws. But it is possible there are inheritance tax laws which make inheritance of a life estate taxable. The amoun…t of the tax is tricky to figure out though and often is a subject of a compromise. To begin with, keep in mind that when one person owns the life estate only, another person ( called a remainderman) owns what is called the remainder interest. Both people may have to pay an inheritance tax on the VALUE of their respective shares. The tax laws use what are called mortality tables to determine these values. These tables estimate the average life expectancy of men and women of certain ages. Then there are corresponding percentage tables which are used to calculate the relative values of the life estate and of the remainder interest. Using an estimate of the life expectancy of the life tenant, the tables will give a number expressed as a percentage. This percentage represents the percentage of the house that the life tenant owns. Note that it is not simply 50% for each person. This percentage is then multiplied by the dollar value of the house with the product representing the dollar value of the life interest. Once the dollar value of the life interest is determined, that amount is subtracted from the actual dollar value of the property itself. The remaining amount is the value of the remainder interest. The inheritance tax obligation for the life tenant and the remainderman will be calculated separately by applying the appropriate inheritance tax rate to the dollar value of their respective interests. Then they each pay their share to the government. The value of a life interest differs according to the age of the life tenant. The value of a life tenancy of a 20 year old person is greater than the value of a life tenancy given to a 70 year old person. This is because the 20 year old presumably will have many more years to live in and make use of the home than the 70 year old person based on average life expectancies, even though there is no guarantee the 20 year old will reach the life expectancy in the table. And, even if the 20 year old pays a tax calculated on his living the full time, there is no recalculation of the tax should he die prematurely. The government will not return any money because the decrease in the value of the life tenant who dies early is exactly set off by the increase in the value of the remainder interest. Nor does one party reimburse the other if things do not work out according to the averages.
If the owner of the policy is not a business, you would not have to pay taxes on a life insurance benefit payout. You should consult with a tax professional in your state for …more details.
If your employer provides more than $50,000 in life insurance coverage for you, you will have to pay tax on what is called "imputed income" from the policies. Even after you r…etire, your employer will continue to send you a W-2 for the imputed income and showing the amount of uncollected Social Security and Medicare taxes you owe.
Yes, life insurance is a tax deferred item. If the policy is paid on the death of the insured there is no income tax on the proceeds as long as you never deducted the premiums… paid on the policy. You never want to take a tax deduction on the premiums as it makes the proceeds taxable. Estate taxes can attach if proceeds are paid to the estate or a trust. If, however you surrender a life insurance policy that has a cash value you are subject to income taxes. As a matter of full disclosure, I own and operate a small Independent Insurance Agency in Georgia and have for 22 years. I also was an agent for a direct writer insurance company for 3 years prior.
new york life says no. but I find different answers on line. wish I could get a correct answer.
The benefits from a life insurance policy are treated as part of the estate and subject to the estate tax. They are not subject to income tax.
No, all monies from life insurance pass tax free. After you set up any kind of vehicle that earns interest, that interest will be taxed.
only if over 5 million dollars
In most cases no! But in the estate it will be subject to probate charges and other fees such as executor.
The answer to the question of whether or not beneficiaries have to pay taxes on the money received from life insurance policies is: no they will not have to.