Is life insurance taxable?
Benefits received from a life insurance policy may be considered taxable compensation by the Internal Revenue Service (IRS). Policy benefits that can be taxed will depend on the insurance plan and the value amount.Taxable Life Insurance PoliciesInsurance policies, such as group life coverage, which are paid partially or in total by companies, employers or organizations, can be considered for taxation. Group life insurance policies that are valued in excess of $50,000 will become taxable income.Non-Taxable Life Insurance PoliciesBenefits from individually owned policies are not subject to taxation. Funds in a cash value account, which accompany permanent life insurance policies such as universal life and whole life, will also be received tax free by the beneficiary.Estate TaxesInsurance plan benefits can be taxed as part of the policy owner’s estate if their possessions are valued over the federal estate exemption limit. As of 2009, estates will be taxed at 45 percent if the value is ov
It would not be wrong to say that the Life Insurance Corporation has risen to its current stature because of tax concessions given to policyholders.
It is the prospect of substantial reduction in tax that has generally induced individuals and Hindu undivided families to take insurance policies.
While the premium paid went to reduce the annual tax burden by way of tax rebate, the lump sum received when the policy matures was treated as tax-exempt capital receipts.
