It’s Tax Time! Will I Owe Money On My Life Insurance Policy? people are getting into full gear on their tax return preparation at this point. Here is a list of some of the more popular questions regarding the taxation of life insurance. With each question I have provided a link for an authoritative answer.

As a life insurance broker, I cannot advise you on your tax obligations. But, I can share with you my three principles for dealing with this topic.

Golden rules for taxpayers

Get educated. You are responsible for this money.

Be sure to get expert advice from a qualified professional.

Trust but verify. If something doesn’t make sense, make sure you get comfortable and confident with what you are doing.

1. Q: Are premiums paid on personal life insurance deductible for personal tax purposes?

2. Q: Is the interest increment earned on prepaid life insurance premiums taxable income?

Here is a question about single-premium policies:

3. Q: How are single premium life insurance policies, including single premium variable life insurance policies, taxed?

4. Q: How is the value of a life insurance policy determined for income tax purposes?

5. Q: May a life insurance beneficiary be required to pay estate tax attributable to death proceeds?

Here are some questions about estate taxation and gifting:

6. Q: Can arrangements for payment of the proceeds of life insurance and annuity contracts attract the generation-skipping transfer tax?

7. Q: How can the generation-skipping transfer (“GST”) tax exemption be leveraged using an irrevocable life insurance trust?

8. Q: Are gifts of life insurance to charitable organizations subject to gift tax?

9. Q: If life insurance proceeds are payable to a religious, charitable, or educational organization, is their value taxable in the insured’s gross estate?

Here is a question about a trust:

10. Q: Are death proceeds of life insurance taxable income if they are payable to a trust?

11. Q: Are annual increases in the cash surrender value of a life insurance policy taxable income to the policyholder?

12. Q: What are the rules for taxing living proceeds received under life insurance policies and endowment contracts?

13. Q; How will material changes in the benefits or terms of a life insurance contract be treated?

Here is a question about life settlements:

14. Q: What are the income tax consequences to the owner of a life insurance or endowment contract who sells the contract, such as in a life settlement?

15. Q: Are life insurance proceeds payable by reason of the insured’s death taxable income to the beneficiary?

Here is a question related to divorce:

16. Q: What are the income tax results when an individual transfers an existing life insurance policy to or purchases a policy for the individual’s former spouse in connection with a divorce settlement?

17. Q: How are split-dollar life insurance arrangements treated for gift tax purposes?

18. Q: Does the income taxation of a life insurance policy that insures more than one life differ from the taxation of a policy that insures a single life?

Additional resources for you:

Here is some good advice on how to choose someone to prepare your tax return.

Here are warnings from the IRS about the 12 most common tax scams.





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