Just as the title indicated. I am the beneficiary of a small life insurance policy. I didn't think you needed to claim beneficiary money as income on Federal taxes, but now I think I may have been mistaken. Anybody know for sure?
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Is Life Insurance Counted as Income?
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Death benefits paid to beneficiaries are income tax free. The death benefit amount, if the policy was owned by the deceased, would be included in their estate, so there could be estate tax due if the value of the estate is over $5,490,000 (for 2017 deaths). But if the estate was less than that, then no estate tax either (as long as they hadn't made large gifts before death that used up their lifetime exemption).
Lots of caveats, but for the vast majority of folks, there's no tax due on life insurance proceeds. Talk to a CPA about your specific situation if you think there's any chance of an estate tax issue.
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Originally posted by Shane View PostDeath benefits paid to beneficiaries are income tax free. The death benefit amount, if the policy was owned by the deceased, would be included in their estate, so there could be estate tax due if the value of the estate is over $5,490,000 (for 2017 deaths). But if the estate was less than that, then no estate tax either (as long as they hadn't made large gifts before death that used up their lifetime exemption).
Lots of caveats, but for the vast majority of folks, there's no tax due on life insurance proceeds. Talk to a CPA about your specific situation if you think there's any chance of an estate tax issue.
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