Is life insurance money taxable
upon my fathers death, in 2010, I received life insurance money from him, do I have to declare this as income and pay a tax? If so, what is the tax rate?
Hi Kim, life insurance money you have received as a beneficiary of your father's investment is tax free.
As a direct beneficiary of the life insurance policy, it would be tax free. You do not report it on your tax return and you will not receive a 1099 form for the proceeds. However, sometimes when there is a delay in the payment, there can be interest added to the proceeds. For example: A $25,000 policy pays $25,142. The $142. is interest. The interest only would be taxed and reported on your tax return on Schedule B as interest income.
The Payment directly to you is typically income tax free, however it can be subject to estate tax if he owned the policy. In 2010 there was no estate tax as it was temporarily phased out. However many states have an estate tax as well. And if a policy was owned by the deceased it is includable in his taxable estate.
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