Is Life Insurance Taxed? Yes And No

For many of us, a life insurance payout is considered the reimbursement of a loss instead of income, and for that reason likely won’t be taxed. That being said, there are still several situations in which you may owe money to the IRS as a result of a life insurance policy. You might be taxed if:

• You received a life insurance payout from a large estate
• You received interest payments on your life insurance payout
• You made a profit after surrendering a cash value policy

Learn more about the situations that may and may not require you to report your life insurance to the IRS.